• Kevin Hassett, director of the White House National Economic Council, said inflation “looks like it’s back” and needs work, signaling renewed concern about price pressures.
  • The remark follows September’s hotter-than-expected CPI report, which showed headline inflation rising 0.6% on the month and 3.7% year over year, with core inflation also accelerating.
  • Hassett stopped short of endorsing an immediate Fed rate hike, calling the energy-driven spike “temporary” and urging policymakers to wait for more evidence.

A Shift in Tone

Kevin Hassett, the White House’s top economic adviser, acknowledged that inflation is again a problem, saying it “looks like it’s back” and requires attention. The comment, made in a recent interview, marks a subtle shift from his earlier stance that the September price jump was largely a temporary energy shock.

The backdrop is a September consumer price index report that came in hotter than economists expected. Overall CPI rose 0.6% for the month and 3.7% from a year earlier, up from 3.4% annual pace in August. Core prices, which exclude volatile food and energy, climbed 0.3% monthly and 2.6% annually, also accelerating from the prior month.

Energy was the main culprit: energy prices jumped 5.2% on the month and 20.4% year over year, with gasoline surging 9.1% and accounting for more than half of the monthly CPI increase. Hassett attributed part of the energy shock to attacks on energy infrastructure in the Middle East, but he also pointed to stable food prices and a 1.2% decline in prescription drug prices as signs that underlying inflation may be less severe.

Nuanced Position

Despite the tougher language, Hassett’s position remains more nuanced than the headline suggests. He described the energy increase as “temporary” and suggested that seasonal-adjustment effects could explain some of the surprise. He urged the Federal Reserve to wait for another month of data before raising interest rates, arguing that the central bank should not overreact to a single report.

His comments put him at odds with some economists. Bill Adams, chief U.S. economist at Fifth Third Commercial Bank (FITB), said the data increased the odds of another rate hike. Heather Long, chief economist at Navy Federal Credit Union, called the report “painful” and said inflation appeared more broad-based and entrenched than economists had thought.

The report raises the stakes for the Fed’s October 28 rate decision. A hike is a risk under discussion, not a confirmed outcome. For markets, the key transmission channel is interest-rate expectations: a more persistent inflation outlook would make borrowing-cost relief less likely.

Broader Pressures

Beyond consumer prices, other indicators point to building cost pressures. The latest producer price index showed a 1.3% monthly increase in September, while import prices rose 1.1%. Those measures are separate from CPI but add to the picture of an economy still grappling with inflation.

Hassett also acknowledged that mortgage costs remain a challenge, arguing that lower inflation and stronger income growth would improve affordability. Real average hourly earnings fell 0.5% in September, meaning inflation outpaced wage growth and weakened purchasing power. It was the third consecutive month in which pay failed to keep pace with prices, according to USA Today (TDAY).

The political tension is between the White House’s argument that the inflation setback may be temporary and concerns that underlying price pressure is becoming more entrenched. September’s CPI report was the final inflation release before the midterm elections, making household affordability especially salient.

Hassett’s latest remark suggests he recognizes the political and economic risks of appearing complacent. But without a full transcript of the interview, it would be premature to interpret his words as support for a near-term rate hike. The next scheduled checkpoints are the Fed’s October 28 decision and the October CPI release on November 10 at 8:30 a.m. Eastern.

Correction: An earlier version of this article misstated the month-over-month change in core CPI. It rose 0.3%, not 0.2%.