Inflation fell a tenth of a percentage point to 2.4% for the year ending in September, the Bureau of Labor Statistics reported on Thursday in an update to the consumer price index, the sixth consecutive monthly drop.
On a month-to-month basis, inflation rose 0.2%.
The decline is good news for Vice President Kamala Harris, who has been working to highlight falling inflation. Inflation is now the lowest it has been since February 2021, shortly after President Joe Biden was sworn in.
But the decline in September was not as much as many had hoped, and other details of the report were discouraging. Most notably, core inflation, a measure of inflation that strips out volatile energy and food prices, rose a tenth of a percentage point to 3.3% on an annual basis. Month-to-month core inflation peaked in at 0.3%, translating to a 3.7% annual rate.
This is the last CPI report before the Nov. 5 elections.
“The good news is that the trend remains broadly disinflationary, but the bad news is that services inflation is still a problem. Inflation is dying but not dead,” said Olu Sonola, Fitch Ratings head of U.S. economic research. “Coming on the heels of the surprisingly strong September employment data, this report encourages the Fed to maintain a cautious stance with the pace of the easing cycle.”
Inflation is the biggest concern facing voters, so the White House and Harris campaign are breathing a sigh of relief that there wasn’t an uptick in headline inflation, which would have been a setback, adding to the worries raised by signs of slowing in the labor market. Republicans have worked hard to tie Harris to the economy. The White House praised the report.
“We keep making progress, with inflation returning to pre-pandemic levels, 16 million jobs created, lower interest rates, and low unemployment,” said Lael Brainard, national economic adviser.
But Republicans seized on how the report was hotter than expected.
“After almost four years of Kamala-induced price hikes, relief is on the way when President Donald J. Trump is re-elected and prosperity is unleashed once again,” the Trump campaign said in an email blast.
The Federal Reserve, which raised interest rates to their highest level since the turn of the century, will also be pleased to see inflation continuing its descent. Continued declines will allow the Fed to cut interest rates, which would be good news for consumers and the labor market.
The Fed cut its rate by half a percentage point at its last meeting, the first such downward revision since the start of the pandemic.
There has been a slowdown in the labor market.
The economy added 254,000 jobs in September, and the unemployment rate fell to 4.1%. However, it has risen from a recent low of 3.4%.
All economic data will be closely watched leading up to the election. Democrats and the Biden administration have worked to emphasize bright spots in the economy, such as robust economic output, while Republicans have blamed too-high inflation on the administration and, in turn, on Harris.
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Both candidates have offered plans that would add to the federal deficit, according to a recent analysis by the Committee for a Responsible Federal Budget, in theory putting upward pressure on inflation.
The Harris economic plan would likely add $3.5 trillion to the national debt while Trump’s would add $7.5 trillion, according to the report.
