The Gasoline Dragon has been defeated. Inflation is returning to its cave as consumers rejoice.
On Wednesday, the Bureau of Labor Statistics (BLS) released its latest monthly consumer price index (CPI). The report, which tracks prices for various consumer products, does not show net price growth last month.
At the same time, year-on-year inflation eased to 8.5% in July after hitting a 40-year peak of 9.1% in June.
The decline was largely due to a sharp decline in gas prices, which has fallen 7.7% since June, offsetting modest price increases in other sectors such as food and housing.
May was the last time inflation gave consumers something to be optimistic about, with the CPI showing inflation falling to 8.3% in April from a high of 8.5% in March. In the summer months that followed, record gas prices kept that key inflation rate on the rise.
The July decline appears to be different, following other evidence that prices may indeed be moderating. On Monday, the New York Federal Reserve released a consumer expectations survey that measures how consumers feel about the economy. This week’s report marked the biggest monthly decline in inflation concerns since the survey began in 2013.
Consumers expect inflation to drop to 6.2% over the next year, down from 6.8% in June, according to the survey. This decline has tangible implications, as inflation expectations are believed to be tied to economic reality, and firms raise prices in response to what they expect the economy to do in the short term. increase.
These expectations are likely a direct result of the very visible and steady decline in gas prices, which peaked at a national average of $5.02 a gallon in mid-June, according to AAA. . Until prices began to fall, consumers were reminded of inflation every time they needed to fill up their cars, worsening the mood in the national economy.
Gasoline prices today average $4.01 per gallon. What did you do to get it all the way down?
Gasoline prices have been particularly hard on President Joe Biden this summer. His approval ratings have fallen as multiple polls show Americans have increasingly negative feelings about the economy.
The issue proved largely beyond his direct control, as gas prices are linked to oil prices and are vulnerable to pandemic-related supply problems and geopolitical turmoil. rice field. Still, he tried to keep the price down.
In June, he sent a letter to oil company executives criticizing them for making record profits without increasing production enough to meet demand.
“I understand that many factors contributed to the business decision to reduce refinery capacity that was made before I took office,” he wrote. “But in times of war, it is unacceptable that far above normal refinery profit margins are passed directly to American households.”
in July, he repeated the same idea on twitter: “My message to the companies that operate petrol stations and set prices at petrol stations is simple: this is a time of war, a global crisis.”
In addition to these public calls to oil companies to help lower prices, Biden also proposed the idea of a three-month nationwide gas tax waiver. The holiday, which analysts said would not cut prices significantly, did not go into effect. However, some states, such as Maryland, Georgia, and Connecticut, have enacted their own laws.
At the same time, the White House coordinated the release of the federal emergency oil reserves to “address the significant global supply disruptions caused by Putin’s war on Ukraine and stabilize volatile energy costs for American households.” ,” said a statement from the Department of Energy.
However, it is unclear to what extent these efforts contributed to the sharp drop in gas prices in July, and to what extent the fall in oil prices contributed.
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