President Trump predicted in a Labor Day message on Truth Social that Republicans would win “big” on Election Day. But Republicans are facing stiffening economic headwinds as election season kicks into high gear.
A record was set Monday as the average cost of a gallon of regular gas was above $4 on Labor Day for the first time ever. AAA recorded the price at $4.15 per gallon, more than 30 cents higher than the previous record of $3.82, set in 2012.
This came after the average price of diesel hit a new high Friday, a mark that was surpassed each day of the weekend.
AAA noted in its analysis that gas prices typically drop this time of year because of reduced demand, but the high cost of crude oil is keeping them elevated.
The soaring cost of energy has also fueled overall inflation, which ticked up to 3.4 percent year-over-year, according to last month’s Consumer Price Index (CPI) — well above the Federal Reserve’s 2 percent target and slightly higher than former President Biden’s final months in office. Economists and politicians alike will be keeping a close eye on the new CPI numbers coming this week.
Costs on some goods are set to rise further after Canada’s 50 percent retaliatory tariffs took effect at midnight. Canadian officials have vowed to meet Trump’s 50 percent tariffs “dollar for dollar,” escalating the trade war between the two countries and posing a particular challenge for GOP candidates in border battleground races.
There’s also continued volatility in the global bond markets, a key indicator of economic anxiety, with yields ticking up at the start of the week.
The economic picture isn’t all bad news for Trump and his party.
The job market has continued to prove its resilience despite economic uncertainty. The economy added 162,000 jobs in August, well above the 53,000 that had been expected, as the unemployment rate held steady at 4.1 percent.
That is a key victory that Trump and congressional GOP candidates can tout on the campaign trail as part of their message that the economy is strong despite the high costs.
But these numbers also mean the Federal Reserve is more likely to raise interest rates, an idea that would be anathema to Trump, who has repeatedly called on the Fed to be more aggressive in lowering rates. The Hill’s Julia Shapero reports that the latest job numbers alleviate concerns that the higher rates are weakening the labor market, allowing the Fed to focus more on curtailing inflation.
The Fed has kept interest rates steady over its past five meetings, but traders are pricing a roughly 60 percent chance that the agency increases rates by a quarter point at its next meeting later this month.
That would be unwelcome, and untimely, news for Republicans. Still, the main driver of economic anxiety continues to be the Iran war.
The U.S. has touted its growing control over the Strait of Hormuz, which has allowed a steady, if limited, flow of oil out of the Persian Gulf. Iran appears determined to change these dynamics.
Mohsen Rezaei, the head of Iran’s Supreme National Security Council, told Iranian state-run media on Sunday that Tehran plans to announce a “restricted zone” by the strait in the coming days. Under the plan, any ship that enters the area with the intention of passing through the strait will be placed on a sanctions list and face “consequences.”
Rezaei said the zone will cover the region within the U.S. Navy’s blockade, extend toward the strait and continue into the Persian Gulf.
The escalation follows the latest round of tit-for-tat strikes between the U.S. and Iran since negotiations to reach a resolution to the conflict fell apart last month. U.S. Central Command hit three Iranian oil tankers located near Kharg Island and the Gulf of Oman on Saturday in response to Iranian attacks on U.S. Navy warships.
Energy Secretary Chris Wright said on Sunday that about two-thirds of the daily traffic that the strait had before the war is getting through.
The administration has also been touting the deal it made with Venezuela to gain control of 65 billion barrels of the country’s oil to help provide relief to consumers. But experts have signaled time may be needed before any impacts could be felt.
Despite these developments, the cost of crude oil has been back on the rise in recent weeks, inching past $90 per barrel.
That will give Democrats a powerful cudgel as candidates and political parties ramp up advertising, campaign stops and debates in the weeks ahead.
▪ The Hill Insider: Controversy swirls around Trump’s Venezuela partner.
▪ The Hill: Republicans divided over wisdom of Trump’s midterm convention.
▪ Axios: Iran war drives $100 billion in extra energy costs.
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