Has Trump really ‘defeated’ US inflation, as he claimed in Davos?

Davos: US President Donald Trump claimed this week that the United States has “defeated” inflation, speaking during his address at the World Economic Forum. While inflation has eased from earlier highs, official data shows it remains above the target set by the Federal Reserve.

According to the Bureau of Labor Statistics, US consumer prices rose 2.7 per cent in December, while core inflation, which excludes food and energy, stood at 2.6 per cent. Both figures remain above the Fed’s long-term goal of 2 per cent.

On a monthly basis, inflation continued to climb, with overall prices rising 0.3 per cent and core prices up 0.2 per cent in December.

Trump’s Davos claims

Addressing business and political leaders in Davos, Trump described the US economy as booming, citing strong growth, rising productivity and higher incomes. He also said his administration had sharply reduced the trade deficit through new trade agreements, insisting this was achieved without adding to inflation.

However, economists say inflationary pressures have not disappeared, particularly in everyday expenses.

Cost pressures remain

Food prices remain a key concern for households. Grocery prices rose 0.7 per cent in December and are 2.4 per cent higher than a year earlier, while overall food costs are about 25 per cent higher than before the pandemic.

Analysts also warn that the full impact of US tariffs may not yet be fully reflected in prices. Some estimates suggest tariffs have already added around half a percentage point to inflation, with further effects possible in 2026 as supply chains adjust.

What comes next

Cooling inflation has increased expectations that the Federal Reserve could cut interest rates later this year, following a quarter-point reduction in December. Lower rates could eventually ease borrowing costs for households and businesses.

At the same time, the White House is preparing to appoint a new Federal Reserve chair, with Jerome Powell’s term ending in May.

While inflation is no longer rising at the pace seen in recent years, the data suggests it has not yet been fully brought under control.