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Inflation Is Down for the 11th Straight Month

"It's the economy, stupid" is a venerable old chestnut in politics. When the economy is good, the president tends to get the credit. When it is bad, he tends to get the blame. Of course, in reality, the president has a limited impact on the economy, mostly limited to appointing members of the Federal Reserve Board. But the voters don't know that and plenty of presidents have been defeated when the economy went south.

There are two aspects to the economy that the voters notice: unemployment and inflation. Right now, unemployment is close to a record low. Anyone looking for a job has plenty of jobs to choose from. During Joe Biden's administration, 13 million jobs have been created. Count on Biden to mention this a couple of times while out on the trail.

The other factor, inflation, is not so positive for Biden, but is improving. The May figures show that inflation has decreased for the 11th consecutive month. Prices increased by 4% compared to a year ago, down from almost 5% in April. It is still high by historical levels, but if it continues to drop for the next year and unemployment does not shoot up, Republicans won't be able to make hay out of a bad economy. Of course, they can't openly root for more unemployment or more inflation—that would be tacky, even for them—but a party can hope, can't it?

Here is the annual inflation rate from 1970 until May 2023.

Annual inflation from 1970 to May 2023

As you can see, the current 4.0% rate is way down from the 2022 peak, but still a bit higher than the long-term average, which is about 3%. Of course, the inflation rate is dropping because the Fed has repeatedly raised interest rates. Fed Chairman Jerome Powell is hoping for a soft landing, but the economy often has its own ideas about such matters. Yesterday, Powell announced that the Board will freeze interest rates for the time being, but cautioned they could be raised in the future if needed. Still, if inflation continues to drop, even by 0.1% per month, and unemployment doesn't spike, Republicans won't talk about the economy much in 2024—but Biden will. (V)

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