Trump says inflation is 'killing our country' under Biden

Former US President and Republican presidential candidate Donald Trump speaks as he participates in the first presidential debate of the 2024 elections with US President Joe Biden at CNN's studios in Atlanta, Georgia, on 27 June, 2024.

Donald Trump accused Joe Biden on Thursday of doing a "poor job" on the US economy and of presiding over a disastrous rise in inflation -- reflecting how rising prices and the cost of living have become key issues ahead of November's presidential election.

"He has not done a good job. He's done a poor job," Trump said during CNN's head-to-head debate with Biden in Atlanta, Georgia. "And inflation is killing our country. It is absolutely killing us.

"I gave him a country with essentially no inflation. It was perfect. It was so good, all he had to do is leave it alone." he added. "He destroyed it"

In response to Trump's attacks on his record, Biden said Trump had "absolutely decimated" the US economy when he was president.

"There was no inflation when I became president. You know why? The economy was flat on its back," he said, adding that his administration had helped create "millions" of new jobs, including in minority communities.

Americans have named inflation or the cost of living as "the most important financial problem facing their family," in each of the last three years, according to a recent poll from the Washington-based firm Gallup.

Perhaps more worryingly for Biden, 46 per cent of adults in the United States said they have "a great deal" or "a fair amount" of confidence in Trump to do or recommend the right thing for the economy, while just 38 per cent said the same thing about the current president, according to another Gallup poll.

Surge in inflation

While it is true that US consumer inflation jumped sharply after Biden took office, hitting a multi-decade high in 2022, the rise was largely fueled by a post-pandemic supply crunch and by Russia's invasion of Ukraine.

In response, the US Federal Reserve hiked its key lending rate from almost zero to a two-decade high of between 5.25 and 5.50 per cent -- where it has remained for the past year.

Higher interest rates cool down the economy by raising borrowing costs for consumers and businesses, indirectly impacting everything from mortgage rates to auto loans.

Inflation has eased sharply since the Fed started hiking rates, but remains stuck stubbornly above its long-term target of two per cent -- keeping the US central bank on pause as it waits for more positive data.

Because inflation has remained high for a number of years, consumer prices have now risen by around 20 per cent since January 2021, when Biden took office, according to the Labor Department's consumer price index (CPI) inflation calculator.

In contrast, consumer prices rose by less than six per cent during the same timeframe under Trump.

Although Congress has given the Fed the mandate to tackle inflation on its own, it is still a difficult topic for Biden, who has looked to talk up his economic record ahead of November's election.

'Inflationary' policies

The Fed expects inflation will continue to ease this year and next, before hitting its long-term target of two per cent in 2026.

But the path to two per cent will likely depend on who becomes president in November -- and which parties will control the House of Representatives and the Senate.

Trump has suggested that, if he wins the election, he will look to extend a series of tax cuts made under his leadership, severely restrict immigration, deport some foreign-born illegal immigrants and slap tariffs on all US imports.

These policies would all "likely be inflationary," by putting up prices, placing upward pressure on wages and boosting adding to the nation's debt, JP Morgan economists wrote in a recent note to clients.

As things stand, Republican control of the House, Senate and the White House is not the most likely scenario come November, Oxford Economics lead US economist Bernard Yaros wrote in a recent note to clients.

"If Biden is reelected but presides over a divided government, the upside risk potential to the economy from fiscal policy is limited," he said.

"If Trump returns to the White House with a divided government, he will have a tougher time enacting his fiscal agenda," he added.

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