Slowing inflation poses new challenges to Trump’s economic attacks

The fact that inflation is now below 3% for the first time since 2021 complicates Donald Trump's ongoing efforts to criticize Kamala Harris' economic record.

According to data released on Wednesday, the consumer price index (CPI) fell below that threshold in July, recording an annual increase of 2.9 percent – up from 3 percent in June.

This latest sign of progress on pricing policy obviously benefits the vice president as Harris seeks this week to distance herself from some unpopular aspects of Joe Biden's economic record and set out her own economic agenda.

However, it will be more difficult for Trump to keep inflation at the center of his 2024 election campaign.

The increasingly complicated dynamics were on full display Wednesday night when Trump traveled to Asheville, North Carolina, to speak about the economy.

Trump focused much of his speech – as he and his Republican colleagues have done for months – on the overall 20% increase in prices since Biden and Harris took office.

But at some point he could no longer resist this week's good inflation news.

“Now it may be starting to come under control,” he acknowledged, before briefly referring to areas such as car insurance, where prices have risen dramatically over the past 3.5 years.

Otherwise, during his speech, Trump seemed more interested in talking about other topics, frequently deviating from his prepared remarks to focus on issues such as immigration or a recent Time magazine cover featuring Harris.

Trump once even said about the economy: “They say it’s the most important issue, I’m not so sure.”

It was a contradictory message from Trump, highlighting how difficult it is for him to both find lines of attack against Harris that will stick in voters' minds and, at the same time, make economic arguments against her in the face of a robust economy that continues to outperform in many ways.

There are also challenges for Trump as Harris spends the week trying to define herself more broadly on the economy.

The vice president will also deliver a highly anticipated speech on Friday in nearby Raleigh, North Carolina, where she will focus on issues such as grocery prices and “corporate price gouging.”

A focus on “Kamalanomics”

On Wednesday, Trump's campaign team also went to great lengths to brand Harris' agenda as one of “Kamalanomics” – a play on the label “Bidenomics,” first used by the Biden team but now used more disparagingly by Republicans.

This move comes after Trump spent months suggesting he did not believe the official inflation figures.

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“They like to say 20%, 29%, 26%, 31%,” he said recently at a campaign rally in Florida. “I think the real inflation is way over 50%, and I believe that.”

At a rally in Minnesota, he added that Harris had caused “the worst inflation in half a century, I think the worst inflation we've ever had.”

Aside from a few individual items, there is evidence to support Trump's claim of 50% inflation. In fact, most Republican reactions to this week's inflation numbers focused on the official numbers, highlighting the 20% increase since Biden and Harris took office and areas where prices have risen particularly quickly, from baby formula to gasoline.

What clearly angers Trump and his Republicans, however, is new evidence this week that voters may give Harris leeway on some aspects of Biden's unpopular economic policies.

A much-discussed poll published this week by the Financial Times and the University of Michigan found that Americans have more confidence in Kamala Harris to handle the US economy than in Donald Trump, by a 42 to 41 percent majority.

This represents a dramatic reshuffle of the race from when Biden was the candidate and 60% of voters in the poll said Harris should either break completely with the president's economic policies or “completely change” them.

A crucial interest rate decision next month

As for economic debates and the 2024 election campaign, the political spotlight is likely to only increase in the coming weeks as the Federal Reserve appears poised to cut interest rates at its next meeting on September 17-18, provided inflation remains moderate.

Just this week, US producer prices also rose less than expected. This reading, combined with the consumer price index, seemed to provide further data supporting a rate cut in September. Traders now believe that rate cuts in September are virtually certain.

Such a move would surely reverberate throughout the campaign, and Republicans from Trump down would surely portray the move as a capitulation to election-year pressures.

The independence of the Fed has already become a central issue in the election campaign.

In an interview with Bloomberg published earlier this month, the Republican candidate and former president reiterated that central bank officials should not ease monetary policy before the November election.

“They know they shouldn’t do that,” Trump said.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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