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Without the drop in gas prices due to lower demand, inflation would be around 0.5% from June

On Thursday’s “Morning Joe” show on MSNBC, Steve Rattner, who served as an adviser to the Treasury Secretary in the Obama administration, said that if it weren’t for the drop in gas prices, “you would have had a inflation of about one [0.5%] rate” and that most of the decline in gasoline prices is due to lower demand, such as people in the United States driving less.

Rattner said, “Why was there no inflation from June to July? … [G]asoline declined, as you just mentioned, very substantially. And that exactly offset the increases in other prices. And so, they actually zeroed themselves. Without this change in gas prices, you would have had an inflation of about one [0.5%] rate, still much better than what we’ve seen, still a bit – still a bit more than we want. Now if you look at it year over year, so this month of July compared to last July, you can see that prices are still rising strongly, albeit slightly less strongly. Last month, in June, they were up 9.1%. That went down to 8.5% in July, a little less than people expected. And that’s – and that’s good news. This is all good news. But it’s important to note that even if prices didn’t rise at all for the rest of this year, we would still have 6.5% inflation this year.

He added: “It’s kind of un-American to be against falling gas prices and to be unhappy when gas prices drop. They have fallen for several reasons, and most of them are demand-related. Obviously, there are not many new supplies, we produce a little more, but it is not enough to matter. What’s really going on is two things: one, China is very slow right now, and their gas consumption, their overall oil consumption has been very unusually low, and that’s had an impact on prices. And second, there was demand destruction. In the United States, for example, people drive less, they use less gas. … And the Europeans, because of the war in Ukraine, are also taking steps to reduce their oil consumption and all this has had a very positive effect on oil prices.

Follow Ian Hanchett on Twitter @IanHanchett

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