MICHEL MARTIN, HOST:
The Labor Department's latest Consumer Price Index report came out this morning. It showed inflation continues to ease with consumer prices posting their smallest annual increase since early 2021. The report showed consumer prices in August were up 2 1/2% from a year ago. Housing costs are still climbing, but gasoline prices are down from a year ago, and grocery prices rose less than 1%. Analysts suggest these numbers will likely cement an expected rate cut by the Federal Reserve during its next meeting. For more on this, we're going to hear from Lael Brainard. She is director of the National Economic Council. She is an economist, and she was appointed to the position by President Biden to advise on economic policies. Good morning.
LAEL BRAINARD: Good morning.
MARTIN: So what's the big takeaway from this report for you?
BRAINARD: Yes. I think the big takeaway is that we are turning the page on inflation. Inflation is now down to 2 1/2%, and that's close to the level the month before the pandemic started. Of course, we still have work to do in areas like housing costs, which are too high. But with inflation coming back down, close to normal levels, it's clear the focus now has to be on sustaining the historic gains for American workers that we've seen. Working-age people have the highest employment rates in decades, and that's helped keep the economy growing and consumers resilient because wages and incomes have risen faster than prices. So it is an important data point this morning, and it really puts the focus on sustaining gains for American workers.
MARTIN: So, you know, the cost of living obviously is a central theme of this election and certainly of last night's debate. I mean, I think we should just acknowledge that the White House has very little control over inflation and none over the Fed, which you certainly know. You're a former vice chair of the Fed. But is there something in this report that offers encouragement to people who are still struggling with how expensive things are?
BRAINARD: Well, I think it's very encouraging to see that inflation is back down close to normal levels. And, of course, we saw yesterday that median incomes are up substantially since last year - about $4,000 - and they're up since before the president took office. So that is important progress. That means people are earning more now even after adjusting for inflation. But of course, you're right, we need to keep working hard to lower costs.
And I think in areas like prescription drugs, you've seen that the historic legislation the president, the vice president got passed, has actually lowered insulin drug prices to $35. That's hundreds of dollars a month. They've gotten caps on out-of-pocket drug prices for seniors. And they've had the first 10 drugs that can be negotiated now, and they want to make sure that those kinds of reforms can help lower drug prices for everyone.
On housing, too, we need to build more affordable units. And both the president and vice president have been really strong on saying how important it is for Congress to come together and finance the construction of millions of additional supply of affordable homes. That'll bring rents down.
MARTIN: Do you agree that an interest rate cut is likely?
BRAINARD: So I can't speak to the Federal Reserve. But what I can say is that with inflation coming back down close to normal levels, that really does enable a focus on sustaining the strength in the labor market. Of course, we've been very focused on that.
MARTIN: So before we let you go, there seems to be a gap - I think you would probably agree - between public perception of the economy and what the traditional indicators say. Do you think that that gap is narrowing, between what the indicators tell us about how the economy is going and how people feel that it's going?
BRAINARD: Yeah. I think it's good to step back and just remember how much the American people have been through over the last few years. It's been an incredibly volatile period from the pandemic and the inflation that was associated with that. So I think where we are today is people are beginning to feel good about their personal finances. So if you look at incomes, up more than prices, people have more purchasing power - that's good - but they're still very worried about things like housing prices. And it's going to really take a concerted effort - Republicans coming together with Democrats instead of blocking them - to make sure that we build more affordable homes and bring those rents and housing prices down.
MARTIN: That's Lael Brainard, who is director of the National Economic Council. Miss Brainard, thank you so much for speaking with us.
BRAINARD: Thank you.
(SOUNDBITE OF HNNY'S "KINDNESS") Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR鈥檚 programming is the audio record.
