Evidently, a stark erosion in the nation’s demand for gasoline has failed to curb our inflation crisis. The consumer price index increased by 8.5% over the year ending in July, according to the Bureau of Labor Statistics.
Although this marks a slight decrease from June’s 41-year high of 9.1%, the Federal Reserve will likely be further incensed that core CPI (a preferred inflation measure of theirs that ignores the more volatile categories of energy and food) remained at 5.9%, the same as the month before.
White House allies and the monetary doves who browbeat the Fed into keeping interest rates at zero last year will attempt to spin the BLS’s report as a success, a sign that President Joe Biden releasing oil from our strategic reserves worked and that our central bank need not end our era of easy money to stave off further inflation. Nothing could be further from the truth.
First, consider just the oil question. According to the Energy Information Administration, the national demand for oil plummeted from 9.25 million barrels daily to just 8.54 million barrels going from the oil price peak of mid-June until now. Spurred by those soaring prices, our anemic oil demand matched the peak pandemic lows of July 2020, just months after oil futures actually went negative due to an unprecedented lack of demand. That would indicate that we can thank recession-spooked consumer demand contraction, not an influx of supply, for decreasing overall oil prices.
And even so, the rest of the report is a total mess. Food price hikes continue to accelerate, with the price spike of food at home nearly double that of food away from home. Even worse are shelter costs that, despite them comprising a third of the CPI basket, are a gross underestimate. Although the BLS reports that shelter costs increased just 5.7% over the past year, both monthly mortgage costs and rents have risen far higher than that. Thanks to the increase in mortgage rates, the average monthly payment on a median-priced home has increased from $1,289 to $1,877 in the past year — a staggering 45%. The average monthly rent, aggregated by Redfin, is up by 15%.
Even ignoring the realities of inflation not properly captured by the BLS, the Fed will have to face stagnated core CPI inflation and the failure of gas prices to decrease the overall phenomenon of inflation. Between Wednesday and last week’s jobs report demonstrating persistent gains, the Fed remains utterly devoid of any reason not to amp up interest rates and wage war against surging stagflation.
