Inflation has shown a persistent upward trend in three of the last four months, slightly exceeding levels from a year ago. This issue, which played a role in derailing then-Vice President Kamala Harris’ presidential campaign, remains a significant concern. However, recent statements from President Donald Trump and Federal Reserve Chair Jerome Powell suggest a more optimistic outlook. Trump recently declared at the United Nations General Assembly that grocery prices and mortgage rates have declined, claiming victory over inflation. Similarly, Powell noted in August that inflation, though still elevated, has significantly decreased from its post-pandemic highs and that upside risks have diminished. Despite these reassurances, inflation remains above the Federal Reserve’s 2% target, posing risks for both the White House and the Fed. Surveys indicate that many Americans still view high prices as a major financial burden, and the Fed’s credibility in managing inflation could be at stake if its assumptions about temporary tariff-induced inflation prove incorrect. The Fed recently cut its key interest rate, prioritizing concerns over unemployment rather than inflation. However, economists warn that ongoing tariffs and corporate price hikes could lead to more than just a temporary inflation spike. For instance, tariffs on imported goods like furniture, appliances, and toys have driven up costs, with long-lasting manufactured goods seeing a 2% increase in August—a notable shift after decades of declining prices. Grocery prices rose 2.7% in August, the largest non-pandemic increase since 2015, while coffee prices surged nearly 21% due to tariffs on Brazilian imports and climate-related droughts. Despite these pressures, some Fed officials believe other factors, such as slowing rental costs and reduced immigration, will help mitigate inflation in the coming months. Nonetheless, the interplay between tariffs, consumer confidence, and inflation remains a critical issue for policymakers.
Trump says inflation is ‘defeated’ and the Fed has cut rates, yet prices remain too high for many
