The Federal Reserve will meet later this month to make a decision on interest rates. But the latest inflation report is likely to make the central bank cautious about additional rate cuts.
STEVE INSKEEP, HOST:
We have updated data on how prices are rising in the United States. The Department of Labor’s latest inflation report was out Tuesday, and it shows inflation was about the same from November to December.
A MARTÍNEZ, HOST:
NPR’s Scott Horsley joins us now. Scott, so let’s start with one section of the report. Nationally, gas – gasoline might be getting cheaper at the pump, but what did the report say about other energy costs?
SCOTT HORSLEY, BYLINE: Well, they’re generally going up. The Labor Department said yesterday natural gas prices are up more than 10% over the last year. Nearly half the country heats with natural gas, so that’s driving up winter heating bills. We also use lots of natural gas to generate electricity, so those prices are climbing, too. Mark Wolfe heads a group of state agencies that help low-income families cover their energy cost, and he says about 1 out of 6 households is now falling behind on its utility bills.
MARK WOLFE: We’re hearing from families that we helped last year that need more help ’cause the bill has been going up. Then secondly, we’re hearing from families who are working-class families who earn too much money to qualify for help, but are now finding these bills unaffordable.
HORSLEY: Grocery prices were also up sharply last month, along with airfares and the price of clothing. Overall, the cost of living in December was up 2.7% from a year ago, the same annual inflation rate we saw in November, so we’re kind of in a holding pattern.
MARTÍNEZ: OK. Now, we know the high cost of living is a big concern for a lot of families, legitimately so. So how is the Trump administration handling that?
HORSLEY: President Trump generally downplayed concerns about affordability in Michigan, where he gave an economic pep talk yesterday. Instead, he boasted about the strong GDP growth we saw this summer.
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PRESIDENT DONALD TRUMP: We have quickly achieved the exact opposite of stagflation – almost no inflation and super high growth.
HORSLEY: Now, to be sure, GDP growth was strong in the third quarter, but it’s not the case we have almost no inflation. Prices are still going up faster than most people would like. What’s more, that GDP growth has not come with a lot of new jobs. You know, the president toured a Ford Motor plant yesterday, but U.S. auto manufacturers lost 28,000 jobs last year. Manufacturing overall lost 75,000 jobs, so the economic picture is not quite as rosy as the president would like us to think.
MARTÍNEZ: Now, in a couple of weeks, the Federal Reserve is going to meet to talk about interest rates, and the central bank has been getting a lot of pressure from the president to lower those rates. How is that working?
HORSLEY: Yeah. The Fed is cutting interest rates, but not as quickly as Trump would like. Most forecasters think the Fed’s going to hold rates steady when policymakers meet later this month because inflation is still too high, and yesterday’s cost-of-living report just cemented that expectation. Trump wants much lower interest rates, and his administration’s gone to extraordinary lengths to push the Fed in that direction. An ominous example came over the weekend with news the Justice Department had launched a criminal investigation of the central bank, which Fed Chairman Jerome Powell dismissed as an effort to intimidate him and his colleagues. Since then, a number of lawmakers and businesspeople have come to Powell’s defense, including the nation’s top banker, Jamie Dimon of JPMorgan Chase.
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JAMIE DIMON: So I just want to say that while I don’t agree with everything the Fed has done, I do have enormous respect for Jay Powell, the man.
HORSLEY: Dimon warned the White House pressure campaign could actually backfire. If people start to think the Fed’s independence is in jeopardy, it could ultimately lead to higher inflation and higher interest rates.
MARTÍNEZ: All right. That’s NPR’s Scott Horsley. Scott, thank you.
HORSLEY: You’re welcome.
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