US inflation stubbornly high in challenge to Trump

In the third quarter, the United States economy expanded at an annual rate of 3.4%, surpassing market forecasts, according to the Commerce Department's Bureau of Economic Analysis. This growth came from increases in investment, consumer spending, and government spending, offset by a decline in exports. The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation metric, rose by 3.6% year-on-year in September, up from the previous month.

The US-Israel conflict with Iran has driven up global energy prices, resulting in US consumers paying 42% more for regular gasoline, compared to AAA motor club data.

The strong GDP growth will benefit President Donald Trump, who has emphasized the economy's robustness despite high prices impacting households. Much of the economic expansion has been fueled by an investment surge in Artificial Intelligence (AI) technology, with companies investing billions in new models and data centers. GDP growth, according to the BEA, was driven by an increase in investment and an upturn in government spending, partly balanced by a decrease in exports. Imports also rose more in the third quarter than the previous year.

Economists have cautioned that while US GDP growth has remained steady despite price pressures, outcomes have been uneven, with wealthier households thriving while working-class families struggle. The Federal Reserve, on Wednesday, decided to maintain interest rates, citing the necessity for more data to determine the best approach to combat surging inflation.

Fed Chair Kevin Warsh reiterated the Fed's commitment to its long-term two-percent PCE inflation target, which it has failed to meet for over five years. Markets anticipate the Fed will raise rates by a quarter-point in December.

Trump's economic record is a significant concern for voters leading up to the midterm elections on Tuesday, where Democrats aim to take control of both houses of Congress from the president's Republican Party. Democratic Senator Elizabeth Warren criticized Trump for his handling of the economy, stating that families paid an average of US$3,772 more in September due to inflation, driven by higher prices for gasoline, housing, and healthcare.

Trump, at a rally in South Carolina, touted the "roaring" economy, renewed his attacks on Fed officials over monetary policy, and warned supporters to vote Republican if Democrats won the midterms.