'I told you': Biden assures reporters 'my policies are working' after latest inflation report
President Joe Biden is taking a victory lap after the Consumer Price Index (CPI) showed that inflation rates have slowed to their lowest level in three years. Now, he's encouraging the White House press corps to give him credit where it's due.
On Wednesday, NBC tweeted a video of Biden at the White House taking questions from reporters amid the latest CPI report. Gabe Gutierrez – the network's senior White House correspondent — asked Biden: "Has the U.S. beat inflation, Mr. President?"
"Yes, yes, yes, I told you we were gonna have a soft landing," Biden said. "My policies are working. Start writing that way, OK?"
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The month-over-month CPI reading of inflation rates showed Wednesday that inflation was just 2.9%. This marks the first time since 2021 that the monthly overall increase in prices has been below 3%. In the meantime, wage growth showed a month-to-month increase of 3.6% in the July jobs report, meaning more Americans have more money in their pockets on average.
With consistently low inflation rates over the past several months, the Federal Reserve may end up cutting interest rates for the first time in years during its next meeting in September. A rate cut would be welcome news for Americans who have been holding off on making large purchases like homes and vehicles, and for businesses looking to expand.
Between March of 2022 and July of 2023, the Fed raised interest rates 11 times. Fed chair Jerome Powell argued the rate hikes were necessary at the time in order to stave off runaway inflation rates. Despite Americans making fewer large purchases following those rate hikes, The Street reported that consumer spending still remained high, and GDP growth continued at rates higher than forecasters predicted.
Should the Fed end up lowering interest rates next month, that would officially confirm the "soft landing" Biden boasted about during his Wednesday press conference. In economic terms, a "soft landing" is what happens when inflation rates drop and interest rates are reduced while simultaneously avoiding a recession. The last time the U.S. economy had a soft landing was in 1994, according to Investopedia.
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"Eight of the last nine times the Fed has aggressively raised interest rates, it’s caused a recession, according to a 2022 analysis by Piper Sandler," Investopedia's Diccon Hyatt wrote in March. "If inflation stabilizes with no economic downturn, the Fed will have found what economists have dubbed the 'holy grail' of monetary policy—raising interest rates enough to cool the economy, but not so much that it smothers growth."
Given the current healthy state of the economy, a recession (typically defined by at least two consecutive quarters of negative GDP growth) seems unlikely. The Biden administration accomplishing a recession-free economy while taming inflation and calming interest rates defied the expectations of many economists who said previously that high unemployment would be necessary.
In 2022 remarks to the London School of Economics, Larry Summers — a top economic adviser to former Presidents Bill Clinton and Barack Obama — predicted that the jobless rate would need to exceed 5% for roughly five years in order to get inflation under control. Summers also criticized Biden's American Rescue Plan, which injected $1.9 trillion into the economy during the height of the Covid-19 pandemic.
"The idea that bringing down inflation has nothing to do with increasing unemployment runs different from all conventional macroeconomic assessments," Summers told the Washington Post last year.
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