US inflation likely slowed in August, largely thanks to lower gasoline prices, but not enough to satisfy policymakers, especially President Joe Biden, as high prices continue to hurt families and American companies.

The consumer price index (CPI), a key measure of inflation, is expected to have fallen in August from the previous month – the first drop since November 2020. The Labor Department is due to release the latest data on Tuesday .

The annual pace of inflation is also expected to have improved to 8.0%, according to a MarketWatch consensus forecast, from a blistering 9.1% in June, the highest in 40 years.

Prices have been skyrocketing for months, exacerbated by the Russian invasion of Ukraine, which has impacted energy and food prices, as well as continued supply chain groans in the amid China’s Covid lockdowns.

While Americans will appreciate the relief at the pump, from steadily falling gas prices, high food and housing costs continue to strain family budgets.

“Risks remain tilted to the upside, due to an uncertain outlook for key inputs, including agricultural and energy commodities, as well as the pass-through of wage gains in a tight labor market,” according to Barclays US analysts. , Pooja Sriram and Jonathan Hill. .

They predict a 1% increase in food prices during the month, with a 0.6% rise for housing.

Inflation has also become a hot political issue just weeks away from the key midterm legislative elections, and Biden has made tackling high prices his top national priority, so any relief will be welcome at the White House. .

“Inflation is way too high and it’s critical that we bring it down,” Treasury Secretary Janet Yellen said on Sunday, echoing a comment she and other administration officials made to several occasions to show their sympathy for the difficult situation facing consumers and businesses.

– Risk of recession –

The Federal Reserve sees inflation as the biggest risk to the world’s largest economy and has acted aggressively to cool demand, raising the benchmark lending rate four times this year, with a third consecutive three-quarter hike point widely expected next week.

Fed actions increase the cost of borrowing for homebuyers and businesses, which tends to dampen investment and spending.

Fed Chairman Jerome Powell said the central bank would do whatever it takes to make sure high prices don’t take root, even at the risk of tipping the economy into a recession.

“Time is running out,” Powell warned on Friday, pledging to “keep going until the job is done.”

Yellen acknowledged that there is “certainly a risk” of an economic slowdown amid rising loan costs, but she noted that the US labor market is “unusually strong” with nearly two vacancies for every worker in looking for a job.

And she warned that “we cannot have a strong labor market without inflation under control”.

Fed officials said they were encouraged by the easing of price pressures, but not satisfied. A survey released by the Federal Reserve Bank of New York on Monday showed consumer inflation expectations fell sharply in August.

The strength of the labor market – the jobless rate was 3.7% in August – is also providing some comfort, giving policymakers breathing room and potentially stifling inflation without a sharp rise in unemployment.

But the labor shortage remains a concern as it could fuel a dangerous wage spiral.

And many economists are skeptical of the Fed’s ability to deliver the desired “soft landing.”

“It’s unlikely, but not impossible,” that the Fed will achieve that goal, according to Laurence Ball of Johns Hopkins University and Daniel Leigh and Prachi Mishra of the International Monetary Fund.

In an article published last week, they warned that “the small increase in unemployment projected by the Fed will not be enough” to bring down inflation.

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