LEILA FADEL, HOST:
President Trump had a surprising response to the highest level of inflation in more than three years.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER: Are you concerned, Mr. President, about the latest inflation number, which came out this morning? Could that be a negative...
PRESIDENT DONALD TRUMP: No. I love it.
UNIDENTIFIED REPORTER: ...For Republicans...
TRUMP: The numbers were great.
UNIDENTIFIED REPORTER: ...To try and hold...
TRUMP: You know what I really love?
UNIDENTIFIED REPORTER: ...The House and the Senate?
TRUMP: I love the inflation. You know why?
STEVE INSKEEP, HOST:
The president told The New York Post later on that when he said, I love the inflation, he meant that he loved that inflation wasn't higher and that it will improve once he ends the war he started. The Iran war has driven up energy prices, and consumer prices overall in May were up a little more than 4% over a year ago.
FADEL: NPR's Scott Horsley has been crunching the numbers and joins me now. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Leila.
FADEL: So how big a factor are gasoline prices in the broader inflation story?
HORSLEY: Well, gas prices have risen sharply in the months since the U.S. and Israel launched their war with Iran. AAA says the average price of gas today is about $4.13 a gallon. That's up about $1.15 since the war began. And energy prices were the biggest driver of inflation in both April and May. Because of those high gas prices, a lot of people are having to cut corners elsewhere. Emily Inlow is a mother of two in Nicholasville, Kentucky. She says costs and driving distance have forced her to skip sending her 11-year-old son to summer camp this year.
EMILY INLOW: It feels awful as a parent, not being able to, like, give these experiences to my kids that I had growing up. And it just feels like I'm not doing great as a parent, but we got to do what we got to do.
HORSLEY: Inlow's 5-year-old daughter is in daycare, and nationwide daycare prices are also up about 3.5%.
FADEL: Are people's paychecks keeping up with these rising prices?
HORSLEY: No. Average wages are up 3.4% from a year ago, and that's not enough to cover the rising cost of living. Inlow works as an animal control officer. Her husband works at the Toyota plant in Kentucky. They're both working full-time, but Inlow says it feels like they're falling behind.
INLOW: Even though I'm making the most I've ever made at any job, it's grocery prices, gas prices, rent and bills and such. It's just we're going over what we're bringing in every month.
HORSLEY: And that's an unfortunate turnaround because for most of the last three years, wages were rising faster than prices. So workers were seeing a real improvement in their buying power. But, you know, with inflation heating up and wage gains shrinking, that's no longer the case.
FADEL: You know, one of the Federal Reserve's main jobs is to keep prices stable. In other words, not have high inflation. And there's a new Fed chairman. What's he going to do?
HORSLEY: Yeah. Usually the Fed fights inflation by raising interest rates or keeping them high. Of course, President Trump has been demanding lower interest rates. So it's going to be a challenge for the new Fed chairman, Kevin Warsh, when he leads his first rate-setting meeting next week. The good news, if there is any, is that for the most part, the sky-high energy prices are not rippling through to the rest of the economy. With the exception of airfares, which are up because jet fuel's costing more, most prices outside of energy have risen only modestly. Nevertheless, I think interest rates are likely to remain elevated for some time to come.
FADEL: So no big changes for people looking for mortgage prices to fall, then?
HORSLEY: No. Mortgage rates briefly dipped below 6% before the war, but now they're back around 6.5%. And that means many people, like Inlow, are feeling priced out of buying a home.
INLOW: It would be nice to have, like, a home of our own and have our rent money going towards a mortgage. But there's just nothing within the area where we work that would even be close to what we could afford.
HORSLEY: This week, the National Association of Realtors did report a modest pickup in home sales last month. And the share of first-time buyers rose to 35%, which was the highest in almost six years. But with high prices and high interest rates, it's really a heavy lift.
FADEL: NPR's Scott Horsley. Thank you, Scott.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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