Amid mounting pressure on Donald Trump over the soaring cost of living for millions of Americans, US inflation remained steadfast in December. The consumer price index rose 2.7% in the year to December, matching the previous month's figure, according to official data released on Tuesday morning, ahead of the US president's economic speech.
The latest reading was largely in line with economists' expectations and notably above the Federal Reserve's target of 2% inflation. Food prices and housing costs were the primary drivers of the index's increase in December.
On a month-to-month basis, the CPI increased by 0.3%. The 'core' index, which excludes volatile food and energy prices, rose by 0.2%, a growth attributed to the 'unwind of distortions' caused by the longest US government shutdown in history, according to Samuel Tombs, chief US economist. This growth, he noted, was not driven by strong underlying momentum.
The Trump administration has countered that prices are falling and blamed lingering inflation on the Biden administration, which left office nearly a year ago. Inflation peaked at a 40-year high of 9.1% in June 2022 as global economies grappled with rapid price growth due to distortions caused by the Covid pandemic.
Polls indicate that consumers are increasingly attributing affordability issues to the Trump administration. A Harris Poll conducted for the Guardian last month revealed that twice as many Americans believe their financial security is deteriorating rather than improving, and they are increasingly blaming the White House. This sentiment is particularly strong among those who feel their financial security is getting worse.
In response to affordability concerns, President Trump has announced a series of eye-catching measures, including a cap on credit card interest rates and a ban on large institutional investors buying single-family homes. However, these measures have been met with skepticism from some, including Democratic Senator Elizabeth Warren, who pointed out that inflation remains higher than when President Trump initiated his trade war in April.
The latest inflation data was released amidst a heated battle for control of the US Federal Reserve, tasked with guiding the economy. Despite the central bank's three interest rate cuts last year, it defied Trump's push for deeper cuts, leading to intense criticism from the president. This defiance has raised concerns about the Trump administration's threats to the independence of the central bank, with the Department of Justice serving grand jury subpoenas on the Fed, potentially leading to a criminal indictment.
