On The Money — Five reasons why inflation is stubbornly high  

We break down why prices are still rising amid the Federal Reserve’s battle to slow inflation. We’ll also look at retail sales plateauing and President Biden’s latest efforts to make your prescriptions cheaper. 

But first, people are kind of freaked out about nuclear war. 

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.

Here’s why inflation isn’t slowing  

Inflation accelerated again in September, defying the expectations of economists and lingering at the highest levels in decades. 

Despite rapid rate hikes by the Federal Reserve, an unraveling global economy and slowing U.S. growth, prices have kept rising at rapid rates.  

Here’s why inflation keeps rising even as the economy slows: 

• A strong labor market: The U.S. has added jobs at a rapid pace throughout 2022 as businesses struggled to fill a record number of open positions. The combination of historically high job openings, steady consumer spending and federal stimulus gave workers leverage in the job market. 
  
• Housing shortage drives prices higher: A national shortage of affordable housing is putting pressure on American budgets and weighing heavily on inflation figures. The recovery from the COVID-19 recession has only made it worse. 
  
• The slow healing of supply chains: Supply chains are far less stressed now than they were in 2021, when successive waves of COVID-19 variants, lockdowns in China, shipping backlogs, material shortages and a glut of new spending added fuel to inflation. 

Sylvan digs into this here. 
Read more: Inflation report is bad news for Democrats 

DEMAND DOWN

Retail sales flatten out in September as inflation takes toll 

Retail sales were flat in September, according to data released Friday by the Census Bureau, a potential sign of American consumers buckling under high inflation. 

Retailers and restaurants made $684 billion in sales last month after seasonal adjustments, unchanged from August’s retail sales total. Sales rose 0.4 percent in August before flattening out last month, according to the Census Bureau. 

• The September slowdown in retail sales came as prices rose 0.4 percent on the whole last month and 8.2 percent over the past year, according to Labor Department data released Thursday. 
  
• Americans pulled back their spending on electronics, furniture and home supplies, building materials, autos, and sporting goods in September — all areas that saw incredibly high demand and short supply toward the start of the recovery from the COVID-19 recession. 
  
• Restaurants, online retailers, grocers, health goods stores and department stores all saw sales increase slightly in September, while clothing stores also saw a modest boost in sales. 

Sylvan breaks it down here. 

FIGHTING COSTS

Biden to sign order aimed at lowering prescription drug costs 

President Biden will sign an executive order on Friday to explore additional ways his administration can lower prescription drug costs. 

The order directs the Department of Health and Human Services (HHS) to examine how it can use its Innovation Center to lower drug costs, the White House said in a press release. The Innovation Center, which was created under the Affordable Care Act, develops and tests new payment and delivery models for Medicare and Medicaid. 

• After about three months, HHS will submit a report outlining its plans to use the Innovation Center to lower drug costs and promote access to new drug therapies for Medicare participants, the White House said.  
  
• The order aims to build on the Inflation Reduction Act’s drug pricing reforms. The law, which was passed and signed into law in August, allowed Medicare to negotiate drug prices for the first time and placed caps on the cost of insulin under Medicare and drug costs for seniors on Medicare. 

The Hill’s Julia Shapero has the deets here. 

BUDGET STRUGGLE

Why seniors may struggle to meet budgets even with a Social Security COLA boost  

The Social Security Administration’s announcement this week to boost its annual cost-of-living adjustment (COLA) to 8.7 percent means the average retiree can expect to see around $144 more in their monthly checks beginning in 2023.   

Though the move was hailed by many who say it will help beneficiaries keep up with rising costs driven by inflation, some seniors — who make up the majority of Social Security recipients — may still struggle to pay living expenses.  

That’s because a host of variable factors influence what individuals’ actual take-home pay will be next year, while poverty trends and challenges faced by vulnerable groups could compound cost-of-living unaffordability.   

Gianna Melillo explains here. 

Good to Know

Twitter wrote in a court filing unsealed on Thursday that Tesla CEO Elon Musk is under federal investigation for his conduct in a takeover bid for Twitter announced earlier this year. 

Attorneys for Twitter wrote that Musk’s lawyers claimed “investigative privilege” to avoid turning over documents related to the lawsuit. 

Here’s what else we have our eye on: 

• Posts spreading misinformation are most amplified on Twitter and TikTok, according to a new report that looked at the spread of false narratives online. 
  
• The Department of Veterans Affairs (VA) on Friday announced an initiative to expand survivor benefits to survivors of LGBT veterans, many of whom were unable to legally wed before the Supreme Court legalized same-sex marriage nationwide in 2015. 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you next week.