President Joe Biden on Tuesday is slated to tout the passage of Democrats’ Inflation Reduction Act, but his White House event celebrating the law is coinciding with a hotter-than-expected reading on consumer prices.
The August report for the consumer price index, released Tuesday before the stock market’s open, showed U.S. inflation rose 0.1% in August for an annual rate of 8.3%, topping forecasts for a decline of 0.1% and a year-over-year gain of 8.0%.
The so-called core CPI that omits food and energy increased by 0.6%, exceeding expectations for 0.3%. U.S. stocks
dropped sharply, with the Dow industrials
down by about 700 points in recent trading, as analysts said the Federal Reserve may need to become even more aggressive fighting inflation through large interest-rate hikes that risk triggering a recession.
Read more: Any doubt Fed will raise rates by 75 basis points next week is gone after hot U.S. inflation data
Ahead of the celebration, Biden said in a statement Tuesday that the August data for consumer prices “show more progress in bringing global inflation down in the U.S. 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 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.”
Biden is slated to speak around 3 p.m. Eastern about the Inflation Reduction Act, the Democrats’ big economic package aimed at addressing climate change, capping drug costs and raising hundreds of billions of dollars through taxes on corporations. He signed it into law a month ago.
See: Biden has signed the Inflation Reduction Act. Here’s MarketWatch’s rundown of how it will affect your energy bills, investments and drug costs.
The president will describe the law as a major win for middle-class families over rich special interests, saying it lowers costs and takes aggressive action to tackle the climate crisis, according to a White House official.
Now read: Will the Inflation Reduction Act actually reduce inflation?
Biden “will emphasize that, while he believes Republican members of Congress should have joined in a bipartisan effort to fight inflation, instead, Republicans unanimously opposed lowering costs for the American people,” the official also said.
Republicans have made the president’s handling of the economy their top issue, as they aim to take control of the U.S. House and Senate in November’s midterm elections. They’ve pointed to analyses that say the Inflation Reduction Act won’t actually reduce inflation by a great deal.
“Pennsylvanians are getting slammed by higher and higher prices everywhere they turn as the inflation rate continues to tick up. There will be no relief in sight as long as we continue electing tax and spend Democrats like Joe Biden and John Fetterman,” said the GOP’s Senate candidate in Pennsylvania, Mehmet Oz, who is in a closely watched race against Fetterman, the state’s lieutenant governor.
Meanwhile, Republican Sen. Tom Cotton of Arkansas tweeted shortly after the CPI report that the president should scrap his plan for student-loan forgiveness, which critics have said will contribute to inflation.
Money managers were sounding bearish after the CPI data.
“The underlying details of the report suggest that inflation may be looking increasingly sticky,” said Jason Pride, Glenmede’s chief investment officer for private wealth.
“Stubborn inflation pressures are likely to force the Fed to turn up the heat on its tightening campaign, which puts the broader economy at further risk of a material downturn/recession within the next year. In recognition of these uncertainties, investors should maintain an underweight risk posture, particularly given the premium valuations still prevalent in equity markets.”