The Consumer Price Index (CPI), a key measure of inflation, increased by 8.3 percent in August compared to the same time last year and increased 0.1 percent from the previous month, the Bureau of Labor Statistics revealed on Tuesday.
The rise was worse than the 8.1 percent increase that economists had expected, according to Dow Jones estimates.
The month-to-month figure also came in worse than expected, with economists having predicted a -0.1 percent change to the CPI but instead the measure increased 0.1 percent.
Core CPI, excluding volatile energy and food prices, increased 6.3 percent year-over-year and 0.6 percent from the month before. The price of groceries surged 13.5 percent in August compared to the previous year, the steepest increase since March, 1979, according to the Bureau of Labor Statistics.
The unexpectedly high increase in the CPI comes even as gas prices have fallen considerably in recent weeks after hitting record highs in June.
After the report’s release on Tuesday morning, the Dow Jones Industrial Average dropped more than 400 points.
The new inflation figures were released just one week ahead of a planned meeting of the Fed on September 20 and 21. It is expected to announce a third consecutive 0.75 percentage point interest rate hike to combat inflation.
Federal Reserve Chairman Jerome Powell said at a central bank retreat late last month: “We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent.”
He said decreasing inflation was likely to “require maintaining a restrictive policy stance for some time,” adding, “the historical record cautions strongly against prematurely loosening policy.”
Meanwhile, the worse-than-expected inflation report is a blow to Democrats with less than two months remaining until the midterm elections.
A Pew Research Center survey last month found 77 percent of registered voters say the economy is very important to their vote in the 2022 congressional election. The economy came in as the top issue of 15 listed in the survey.
President Biden responded to the report on Tuesday saying the data “show more progress in bringing global inflation down in the US economy.”
“Overall, prices have been essentially flat in our country these last two months: that is welcome news for American families, with more work still to do,” he said, adding that gas prices have fallen, some grocery store price increases have slowed down and real wages are up.
He continued: “It will take more time and resolve to bring inflation down, which is why we passed the Inflation Reduction Act to lower the cost of healthcare, prescription drugs and energy. And my economic plan is showing that, as we bring prices down, we are creating good paying jobs and bringing manufacturing back to America.”
Despite its name, the impact of the “Inflation Reduction Act” is “expected to be statistically indistinguishable from zero,” according to an independent analysis performed by the University of Pennsylvania Wharton School.
Republicans have been outspoken against the legislation.
“It does nothing to bring the economy out of stagnation and recession, but rather, the Inflation Reduction Act of 2022 gives us higher taxes, more spending, higher prices and an army of IRS agents,” said Senator Mike Crapo of Idaho, the top Republican on the Senate Finance Committee.
Reporting from National Review.