Inflation jumped in March to its highest level since December 1981, to 8.5% over one year, driven by soaring energy prices, but also food, caused by the war in Ukraine. By removing these two items of expenditure, so-called underlying inflation was 6.5%.
This new inflationary surge had arrived when Americans’ wallets had already been suffering for months from multiple shortages that are driving up prices, fueled by still very strong demand.
Data for April for CPI inflation, one of the two measures used in the United States and which is the one on which pensions are indexed, in particular, will be published on Wednesday at 8:30 a.m. (12:30 p.m. GMT).
The rise in prices could begin to stall, anticipate some economists. We should see “the first drop in headline and core inflation since last September,” said Ian Shepherdson of Pantheon Macroeconomics in a note. With the difference, however, “that the April drop will not be a one-off event”.
He expects 8% inflation over one year, and only 0.1% over one month (against 1.2% in March), which would be “the smallest increase since December 2020”, due among other things to a lower gasoline price increase in April than in March.
However, gasoline prices at the pump hit a new record in the United States on Tuesday at 4.374 dollars per gallon (3.78 liters), sinking the level of early March, shortly after the invasion of Ukraine by Russia. and the deployment of sanctions.
– “National priority” –
The Biden administration and the US central bank (Fed) are trying every means to prevent prices from continuing to climb so fast. Because it reduces the purchasing power of households, and threatens the good health of the American economy.
But also the popularity rating of the American president, mediocre with the approach of the mid-term elections.
Joe Biden is thus trying to reassure Americans who are unconvinced by his economic policy, and inflation has been on his agenda every day since the start of the week. He even erected it on Tuesday as a “greatest national priority”.
On Wednesday, he will visit a family farm in Kankakee, Illinois (northeast).
Some “of the roots of inflation” are beyond “my control”, he said on Tuesday, blaming the Covid-19 pandemic and the effects of the war in Ukraine, “two main contributors (…) global in nature”.
The Republicans do not fail to recall that inflation had started to climb long before the war in Ukraine.
The Fed has also made it a priority, and has started to raise its key rates to slow down consumption and investment.
Several of its officials on Tuesday said they were in favor of a rapid rate hike in the coming months. Even if it weighs a little, temporarily, on the job market, and pushes up the unemployment rate.
– “Very uncertain trajectory” –
On Tuesday, Joe Biden also reported on ongoing discussions on a possible removal of customs duties imposed by his predecessor Donald Trump on the equivalent of 350 billion Chinese goods annually. This could, in fact, slow the rise in prices.
“We are discussing it, no decision has been made yet,” the White House host said.
These surcharges are due to expire on July 6 and the services of the Trade Representative announced last week that they had launched a consultation to modify or even eliminate them.
“Inflation is expected to fall very rapidly through the remainder of the second quarter, with further, probably slower declines to come,” economist Ian Shepherdson predicts.
“The trajectory of inflation remains very uncertain,” acknowledged Treasury Secretary Janet Yellen during a Senate hearing.
In addition to the pandemic, the lockdowns in China are compounding problems in supply chains, she observed.