Inflation Eases, Yet Economic Concerns Loom Large for Voters in Presidential Race

Inflation reached a three-year low last month, coinciding with an intensifying presidential election campaign. Despite this decrease, high housing costs and essential expenses continue to dominate economic discussions, as highlighted during the recent debate between Kamala Harris and Donald Trump.

According to the latest data from the Bureau of Labor Statistics released on Wednesday, the Consumer Price Index (CPI) reported a 2.5% increase over the past year, marking the smallest rise since February 2021. The primary contributor to this uptick was shelter, which rose by 0.5% in August. Costs for airline fares, car insurance, education, and apparel also saw increases. Conversely, wages grew by 0.4% in August and by 3.8% year-over-year, with the average workweek lengthening by 0.1 hour, a positive sign for workers facing rising living costs.

A recent survey shows that 81% of voters consider the economy a key factor in their presidential choice, with 40% identifying inflation as their primary concern. Donald Trump, the former president and Republican nominee, attributed high prices to the Biden administration during Tuesday’s debate in Philadelphia, inaccurately claiming that the current inflation surge is unprecedented in U.S. history.

“We’ve had a terrible economy because of inflation, which is really known as a country buster,” Trump stated, asserting that the current inflation is among the worst ever. However, historic records indicate that the highest inflation rate occurred in 1980 at 14%. The recent inflation peak, at 9.1%, was recorded in June 2022.

In response, Vice President Harris emphasized tax cut proposals aimed at alleviating housing costs. She noted, “The cost of housing is far too expensive for far too many people,” and announced plans to extend a $6,000 tax cut for families, representing one of the largest child tax credits in recent years. Additionally, she proposed a $50,000 tax deduction for small startups to support economic growth.

Taylor St. Germain, an economist at ITR Economics, commented on the slowing inflation data, suggesting that the Federal Reserve may need to lower interest rates. “It’s encouraging to see that inflation is slowing,” St. Germain remarked, while also highlighting that elevated shelter costs remain a significant inflation driver.

The Federal Reserve, which began increasing interest rates in March 2022 to combat inflation, has raised rates 11 times, with the last adjustment occurring in July of last year. Economists are closely monitoring the Fed’s upcoming meeting to determine if rates will be cut, which could have substantial effects on the housing market and general costs of living.

Kitty Richards, acting executive director of Groundwork Collaborative, a progressive think tank, criticized the Fed’s approach, arguing that it exacerbates housing supply issues. “The problem with housing is fundamentally a supply problem,” Richards stated. She pointed out that the Fed’s actions have intensified market constraints, making it difficult for individuals to afford housing or even relocate, as interest rates soar.