Inflation eased slightly in July from historic highs, the Labor Department reported Wednesday, a development that prompted President Biden to claim his policies are working and Republicans to call him delusional.
Consumer prices were unchanged last month from June, while the annual inflation rate dipped to 8.5%, still very high but down from June’s level of 9.1%. The rate in June was a 41-year high.
Falling gasoline prices helped keep inflation from rising. The unchanged month-to-month price data was the lowest in two years.
Stocks rallied amid investors’ hopes that the U.S. might avoid a recession. The Dow Jones Industrial Average jumped 535 points, or 1.6%, to close at 33,309. The Nasdaq rose 2.8%, and the S&P 500 climbed 2.1%.
Still, the “core” consumer price index, which doesn’t include volatile food and energy prices, has been running at a too-hot 6.8% over the past three months.
The Federal Reserve has raised interest rates four times this year in its most aggressive inflation-fighting moves since the 1980s. The central bank is considering another hike of its benchmark rate at its next meeting in September.
At a bill-signing ceremony at the White House, Mr. Biden trumpeted that consumer price changes were “zero” in the past month. He said it was proof that his economic plan “is working.”
“When you couple that with last week’s booming jobs report of 520,000 jobs created last month and 3.5% unemployment, it underscores the kind of economy we’ve been building,” Mr. Biden said.
Sen. Lindsey Graham, South Carolina Republican and a member of the Senate Budget Committee, asked in response, “What world is President Biden living in?
“Americans continue to suffer under Biden inflation,” Mr. Graham said. “Clearly, he hasn’t bought any food or filled up a gas tank. He hasn’t tried to order something online and receive it in the same year he placed the order. How out of touch can you be? Sad and dangerous.”
The president conceded that the U.S. economy still faces challenges.
“With the global challenges we face from the war in Europe to disruption of supply chains and pandemic shutdowns in Asia, we could face additional headwinds in the months ahead,” Mr. Biden said. “Our work is far from over.”
The 12-month price data proves that point. Gasoline prices are up 44% from a year ago, food prices are up 10.9%, the cost of electricity is 15.2% higher, and natural gas from utilities is up 30.5%.
The costs of rent, groceries and electricity all increased in July.
Republicans have blamed Mr. Biden and congressional Democrats for fueling high inflation with a two-year binge of trillion-dollar spending initiatives.
“Prices have risen nearly every month since Joe Biden took office, and American families continue to struggle to make ends meet underneath the weight of his failing economy,” said Jesse Hunt, communications director for the Republican Governors Association.
Senate Minority Leader Mitch McConnell, Kentucky Republican, said Mr. Biden and congressional Democrats are trying to mislead voters with claims that the economy is improving.
“Only these reckless Washington Democrats could see another month of crushing 8.5% inflation and try to spin it as a win for themselves,” Mr. McConnell said. “Prices keep skyrocketing upward at historic rates. Democrats have hammered working families with the worst food inflation and grocery inflation since 1979. The American people are paying a Democrat Inflation Tax of more than 13% extra when they feed their families, 15% extra on their electric bill, more than 6% extra on their rent payments.”
Average paychecks are rising faster than they have in decades, but not fast enough to keep up with accelerating costs for such items as food, rent, automobiles and medical services.
On Friday, the House is poised to give final congressional approval to a revived tax and climate package pushed by Mr. Biden and Democratic lawmakers. Mr. Biden said the most “consequential” step the country can take to battle inflation is for Congress to pass the $740 billion package, which its proponents have named the Inflation Reduction Act.
Critics say the bill will have no impact on inflation. Economists say the measure will have only a minimal effect on inflation over the next several years.
• This article is based in part on wire service reports.