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U.S. Inflation Rate at ‘Zero’ — for One Month

For the month of July, the Consumer Price Index for All Urban Customers was unchanged from June. This has triggered a war of words between Democrats, who crow about “zero percent inflation” for July, and Republicans, who say the Democrats are now trying to “deny there’s inflation.”

Both have a point. Inflation did not increase in July, and that may (or may not) be a sign that inflation has peaked or is close to peaking. But inflation remained elevated. The overall inflation rate for the past 12 months is 8.5% — a point that Democrats tend to gloss over.

The war of words started on Aug. 10, when the Bureau of Labor Statistics announced that “Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June.” That day, President Joe Biden opened a bill-signing ceremony with the news — emphasizing the CPI-U for July, but not mentioning the 8.5% increase over the past 12 months.

Biden, Aug. 10: Before I begin today, I want to say a word about the news that came out today relative to the economy. Actually, I just want to say a number: zero. Today, we received news that our economy had 0% inflation in the month of July. Zero percent.

This has become a talking point for the Democrats.

For example, House Speaker Nancy Pelosi said at an Aug. 12 press conference: “As you see, inflation was zero for the past month, zero increase.”

The White House, using Biden’s official government Twitter account, boasted in an Aug. 15 tweet about the president’s economic achievements since he took office — except for inflation, which was mentioned only for July.

In his floor speech prior to House passage of the Inflation Reduction Act, Minority Leader Kevin McCarthy repeatedly criticized Democrats for trying to “deny there’s inflation.” But in doing so, he mischaracterized what Biden is now saying about inflation.

“The president said it was going to be transitory, said it had peaked, said it was everybody else’s fault, but now he says it’s zero,” McCarthy said.

The Republican leader is right that Biden had described inflation as “transitory,” but he’s wrong that Biden now says it’s zero. In his Aug. 10 remarks, Biden was clear he was talking about one month. “And [we] still have work to do, but we’re on track,” he acknowledged.

Experts are divided, however, on the significance of the July report.

In an Aug. 10 article, Kiplinger compiled excerpts from economists about whether inflation has peaked and what the Federal Reserve will do next.

Aditya Bhave, a U.S. and global economist at Bank of America Securities, was bullish, saying the July report “confirms that we have seen a peak in inflation.”

But Sarah House, a senior economist at Wells Fargo Economics, was more cautious.

House described the July report as “welcome news for members of the FOMC,” referring to the Federal Open Market Committee, the policymaking arm of the Federal Reserve, which has been raising interest rates to slow inflation but trying not to trigger a recession. However, she added that “monetary policymakers have made clear that they need to see clear evidence of a sustained slowdown in inflation before pivoting on monetary policy.”

Pooja Sriram, a U.S. economist at Barclays Investment Bank, had a similar take. “Although the move is in the right direction, it is too early to say if the trend will be sustained,” Sriram said.

Inflation is hitting especially hard where people experience it most regularly — at the gas pump and at the grocery store. Despite the recent decline in gasoline prices, BLS said gasoline prices increased 44% over the past 12 months and food at home increased 13.1%. 

So-called “core inflation” — which accounts for all consumer items except for the relatively more volatile items of energy and food — increased 0.3% in July and is up 5.9% over the last 12 months, according to BLS.

As Sal Guatieri, senior economist at BMO Capital Markets, put it in his assessment, the July inflation report is “a sign that inflation is close to peaking, though the climb down the mountain will be slow.”

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