'Too Early for Victory Laps': Bidenomics Failing as Inflation Persists

It won't be easy for Team Biden to sell the idea that the US economy is swiftly returning back on track judging from the latest Consumer Price Index.

"Forget about those March rate cuts from the Fed[eral Reserve]," Axios wrote on February 14 after some analysts assumed in December that the Fed may resort to early rate cuts in the first quarter of 2024 with financial markets having become increasingly convinced that inflation was defeated.

The Consumer Price Index (CPI) – a popular gauge for inflation which was released on February 13 – indicated "still-firm price increases in key areas of the economy," according to the media outlet. These figures poured cold water on those who believed that inflation would slip below 3% for the first time in years.

While overall CPI increase amounted to 3.1% in January – a downward trend from the 3.4% in December – so-called core inflation (which excludes food and energy prices) rose 3.9%, the same as in December. The index's monthly increase of 0.4% was "the biggest since last spring," according to the media outlet.

"By a different measure, core CPI actually accelerated: The three-month annualized rate was 4% in January — up from the 3.3% in December," the report said.

It's clear that these figures are likely to disenchant the Fed from any "premature" interest rate cuts. The market-derived odds of the Fed cutting rates at its March 20 meeting have gone steeply down: from 90% in December 2023 to 9% on February 13.

Tuesday's release of the worse-then-expected inflation indicators has sent the 10-year Treasury note up to 4.27% (the highest level this year) while the S&P and Nasdaq both fell more than 1%.

Biden's back-patting for nearly defeating inflation in 2023 seems to have worn thin. It appears unlikely that Team Biden will now be able to successfully play a "disinflation" card ahead of November 5, 2024.

"The CPI report will likely provide more fodder for Republicans who argue that Democrats are out of touch when it comes to the pain of elevated prices," Politico remarked. What's more, a majority of economists, cited by the media say it's likely or very likely that inflation will stay above 2.5% through the end of the year.

For its part, the New York Times warned that hotter-than-expected inflation also calls the belief that the US economy will receive a "soft landing" into question.