The report could put pressure on the Federal Reserve to keep interest rates high longer as it struggles to curb inflation, creating a potential drag on consumers and businesses. It also comes as the fight over high prices enters a new phase through the lens of the 2024 campaign.

The strength of the US economy under Biden is indisputable, and more and more economists are reducing their recession forecasts this year. In response, Republicans are focusing their economic criticism on the persistence of higher prices, even as cost increases have been slowing. Inflation has risen faster than average weekly income since Biden took office.

“Prices are not rising as fast, but wages have not yet reached the inflation we have seen in recent years,” Heritage Foundation public finance economist EJ Antoni said before the CPI announcement. “That’s one of the main reasons why people are so depressed about this economy and will continue to be that way until that changes.”

The biggest impact of the latest inflation report is that the Federal Reserve could take longer to initiate rate cuts. The central bank plans to lower rates this year, but has been in a tug-of-war with Wall Street over expectations about the timing.

Federal Reserve Chair Jerome Powell has signaled in recent weeks that a rate cut in March is off the table, and Tuesday’s inflation news means anticipation of a move in May could be pushed to June or even later. . US stocks fell after the report.

The CPI report will likely give more ammunition to Republicans who argue that Democrats are out of touch with the effects of high prices. The White House is trying to emphasize that Biden is on the case. Treasury Secretary Janet Yellen will make appearances in swing states in Pennsylvania and Michigan this week.

President
released a video
on Super Bowl Sunday criticizing companies for “counterinflation” and not reducing prices. Biden reviewed the attack in a speech Monday in which he warned against “greed/inflation.”

“I call on corporations to pass on their savings to consumers, for God’s sake,” he said.

Broad-based deflation (a reversal in prices) is probably not occurring in the run-up to Election Day, barring some economic cataclysm. Disinflation is expected to continue, but may not be rapid.

Most economists surveyed by the National Association for Business Economics expect the CPI to remain elevated, and about two-thirds believe it is likely or very likely to remain above 2.5 percent through the end of the year. A New York Federal Reserve consumer survey released Monday showed inflation expectations were largely stable, with the median for this year at around 3 percent. The White House highlighted another finding from the New York Federal Reserve that showed perceptions of household finances improved last month: More respondents said they were better off than a year ago and fewer said they were worse off.

Joseph Brusuelas, director and chief economist at RSM US, maintains that gasoline prices will be key to any change in the way consumers perceive the inflation situation.

“When you talk to your average consumer and ask them about inflation, what they’re really talking about is gasoline and groceries,” he said ahead of Tuesday’s CPI release. “If we continue to see a moderation in energy and gasoline costs, that will be a net benefit for the incumbent operator.”

The “$64,000 question,” according to Unlimited Funds co-founder and CEO Bob Elliott, is whether inflation picks up again.

“The disinflationary pressures that have existed to lower the CPI may not persist forever,” he said Monday. “Where inflation stabilizes will depend more on those more structural inflationary dynamics, such as housing costs and general utility price inflation, which is related to wages. “Those things haven’t gone down as much as the prices of goods have.”

By Sam