The Bureau of Labor Statistics released the June 2024 Consumer Price Index report last week, showing a 3% year-over-year inflation rate, which exceeded economists’ expectations. The core CPI, which excludes food and energy costs, increased by 0.1% month-over-month, reaching 3.3% for the year. Left-leaning economic pundits in the mainstream media are now calling for the Federal Reserve to cut interest rates at its next meeting in September. However, a rate cut is not warranted right now.

First, the Federal Reserve is supposed to be apolitical, with only the nation’s best interest in mind. A rate cut so close to November’s election would make the Fed and its chairman, Jerome Powell, appear to be placing their collective finger on the scale in favor of Joe Biden, as a rate cut, although inflationary, would lead to a short-term bump in the stock market and allow Biden to claim victory over inflation. The inflationary impact of a September rate cut would not be seen by economists, nor felt by Americans, until after the November election.

The last thing the Fed wants to do is to reduce rates in September and then be forced to raise them again in early 2025.

Second, an annual inflation rate of 3% is still 50% higher than the Fed’s goal of 2% inflation.

Third, although people will say that inflation is down, it continues to rise, just not as rapidly. Saying that inflation is down is like a person who gains 10 pounds in one month and five pounds the next claiming to have lost weight. No, that person is simply gaining weight more slowly.

It is the continuing high rate of inflation that is hurting working-class Americans.

According to a Bureau of Labor Statistics survey, the largest household expenditures were housing, transportation, and food, accounting for nearly 65% of household expenditures: 33.8%, 16.4%, and 12.4% respectively. For working Americans, those making fewer than $40,000 per year, housing, transportation, and food account from nearly 70% of household expenditures: 37.8%, 18.1%, and 13.8% respectively.

Add in the cost of health care and the cost of home and auto insurance, and it is amazing that any American has money to save and invest at the end of any given month.

And it is precisely those categories that have risen the most during the Biden presidency.

The price of homes has skyrocketed. In August 2023, the median home price in the United States was $435,450, up from a median sales price of $260,345 at the end of 2019, according to Rocket Homes.

To afford a median-priced home, Americans need an annual income of greater than $110,000, up 46% since 2020. That means that only 18% of individuals or 34% of households can now afford to pay the mortgage on a home, let alone save the money for down payment.

Food costs are up 30% since Joe Biden entered the White House. Staples are up even more with eggs, flour, sugar, and butter increasing 40.9%, 33.8%, 30.7%, and 35.9% respectively.

The price of gas has more than doubled under the Biden presidency.

The Producer Price Index, an indicator of future inflation, rose 0.2% in June. Ocean shipping rates from China to California have increased five-fold over the past year, which helps explain the increase in the PPI.

The Federal Reserve is starting to drive the rate of inflation growth down. This is not the time to celebrate prematurely, but to stay the course. Any reduction in interest rates will be both political and inflationary, at a time when working Americans are still suffering from inflation and feel that the country is in recession.

The last thing the Fed wants to do is to reduce rates in September and then be forced to raise them again in early 2025.

The question remains: Will Jerome Powell lead or play politics?