Fed Members Demand Tapering Despite Eased Inflation Concerns... Biden Announces Measures to Curb Oil Price Rise

July Consumer Price Index Rises 5.4%
Despite Slowing Increase from Previous Month, Fed Officials Urge Tapering
Oil Prices, Housing Rent Remain Unstable Factors
Biden Denies Large-Scale Infrastructure Investment Spurs Inflation
Dow Jones Hits Record High Amid Eased Inflation Concerns

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Although inflation in the United States has shown signs of slowing, Federal Reserve (Fed) officials once again emphasized the normalization of monetary policy.

The U.S. Department of Labor announced on the 11th (local time) that the Consumer Price Index (CPI) for July rose 5.4% compared to the same period last year. The CPI increased by 0.5% compared to the previous month.

The month-over-month increase slightly exceeded market expectations compiled by Dow Jones but showed a slowdown compared to June's 0.9% month-over-month rise.

The core CPI, which excludes fuel and food, rose 4.3% year-over-year and 0.3% month-over-month. This is lower than June's 0.9% increase. The market had expected the core CPI to rise 0.4% month-over-month.

CNBC estimated that the CPI's rise slowed as the surge in used car prices eased. Used car prices increased by only 0.2% in July.

The Wall Street Journal also reported that although inflation in July continued to rise due to labor shortages and economic rebound effects, the pace of increase slowed.

Despite signs of inflation slowing, Fed officials maintained a hawkish stance.

Esther George, President of the Kansas City Fed, said, "As the economic recovery progresses, it is time to return accommodative monetary policy to a neutral stance." President George argued, "Consumers have saved cash, and the labor market is recovering, so less support from the central bank is needed."

Robert Kaplan, President of the Dallas Fed, demanded that tapering be announced in September and implemented in October. He said, "If the economy progresses as I expect, I would support announcing a tapering plan in September and taking action in October."

The Fed is currently purchasing $80 billion in Treasury bonds and $40 billion in mortgage-backed securities monthly to support economic recovery.

President Kaplan stated, "I think it is better to take your foot off the accelerator and reduce the engine speed," adding, "If we run at the current pace for too long, we may have to take more aggressive steps."

This week, Raphael Bostic, President of the Atlanta Fed, and Eric Rosengren, President of the Boston Fed, also called for early tapering.

This contrasts with Fed Chair Jerome Powell's position that tapering or rate hikes should be undertaken only after closely monitoring the economic recovery.

Shima Shah, Chief Strategist at Principal Global Investors, said, "July's CPI suggests that inflation may have peaked," and added, "This will help alleviate concerns that the Fed is responding too leniently to inflationary pressures."

Biden Moves to Block Inflation Concerns... Oil Prices and Housing Rent Are Inflation 'Triggers'

On the same day, President Joe Biden emphasized that he is taking active measures to curb rising inflation.

[Image source=EPA Yonhap News]

President Biden cited the July CPI, noting that inflation growth has slowed, and said, "We are taking steps to address gasoline prices."

He added, "The National Economic Council (NEC) has asked the Federal Trade Commission (FTC) to use all tools to block illegal activities that drive up gasoline prices."

The White House also sought to lower oil prices by urging oil-producing countries to increase production.

President Biden explained that the $3.5 trillion social infrastructure investment plan will not fuel inflation.

The New York Times analyzed that Biden's remarks reflect concerns that if inflation rises further, it would be difficult to win next year's midterm elections. This suggests that rising inflation is also a problem for regime maintenance.

Until now, the White House has maintained the position, along with the Fed, that price increases are temporary.

President Biden also expressed confidence that the Fed will take all necessary measures to curb inflation.

Although inflation growth has slowed, some variables remain, notably housing rent. Housing rent, which accounts for about 30% of the CPI, has recently been rising. It increased by 0.5% in June and 0.4% in July.

Professor Son Sung-won of Loyola Marymount University predicted, "The rise in housing rent may just be beginning. It could become the main culprit of future inflation increases."

On the day, the U.S. 10-year Treasury yield fell slightly to 1.325%. It is analyzed that strong demand in the Treasury auction pushed down yields. A decline in Treasury yields means a rise in bond prices.

Major indices on the New York Stock Exchange showed mixed trends on news of slowing inflation growth. The Dow Jones Industrial Average and the S&P 500 rose 0.62% and 0.25%, respectively, both hitting record highs. The Nasdaq index fell 0.16%.

This content was produced with the assistance of AI translation services.