President Joe Biden expressed optimism about the direction of the US economy Sunday, saying America will be able to rein in historically high inflation and that he’s hoping the Federal Reserve will achieve a “soft landing” by slowing economic growth without going into recession.
“I’m telling the American people that we’re going to get control of inflation,” Biden said in an interview with CBS’s “60 Minutes” that aired on Sunday night.
US inflation this year has soared to the highest levels seen since the early 1980s as a confluence of factors — including the pandemic, supply chain snags, and Russia’s war in Ukraine — have upended the global economy.
The latest reading of the government’s widely followed inflation report, the Consumer Price Index, showed that the annual pace of inflation has started to tick down in recent months, measuring 8.3% for the year ending in August — the second month of declines. In June, the CPI reached 9.1% year over year, the highest inflation rate in more than four decades.
However, August’s CPI report also showed a higher-than-expected month-on-month gain of 0.1%, when economists were anticipating a fall. That sent stock prices hurtling downward, with all three major US indexes logging their worst day in more than two years.
Biden attempted to temper those concerns and expressed optimism that the worst may be over, “Let’s put this in perspective. [The] inflation rate month-to-month was just an inch, hardly at all,” he said in the interview.
He touted his administration’s gains in the labor market, with 10 million new jobs added since he took office, and its investments in the semiconductor industry.
“In the meantime, we created all these jobs and prices have gone up, but they’ve come down for energy,” he said.
While declining energy prices have helped to lower the overall inflation rate, price increases for food and shelter remain stubbornly high.
“If you look at the underlying trend — I look at labor costs and rent increases — they both are pointing in the wrong direction and going up at hefty paces,” economist and Loyola Marymount University Professor Sung Won Sohn told CNN Business last week.
Other inflation measures provide a glimmer of hope. The August Producer Price Index, released a day after CPI, showed continued declines in the average change of prices paid to producers as supply chain troubles ease and the high energy prices finish filtering their way through the economy.
Still, key contributing and detracting factors of inflation remain largely beyond the control of Biden, and even the Fed. While the central bank’s efforts to cinch up monetary policy can dampen demand, Fed officials are not able to tackle conditions on the supply side that may keep upward pressure on inflation.
This week, the Fed’s policymaking committee will meet to determine the next course of action in its battle against inflation. Economists are anticipating the Fed will raise its benchmark interest rate by 75 basis points for the third time in a row.
In that inflation fight, however, there is also concern that the Fed’s barrage of consecutive, massive rate hikes could send the US economy into a recession.
But Biden, in the “60 Minutes” interview, said he doesn’t believe the economy will get worse before it gets better.
“We hope we can have what they say, ‘a soft landing,’ a transition to a place where we don’t lose the gains that I ran to make in the first place for middle-class folks, being able to generate good-paying jobs and — expansion,” he said, “and at the same time — make sure that we are able to continue to grow.”