Trump says inflation was ‘defeated.’ Some economists disagree

In the war on affordability, President Donald Trump has claimed victory over inflation.

Trump said during a speech on Wednesday in Davos, Switzerland, that he had “defeated” inflation and reined in consumer prices over the past year.

Trump, in an address to world leaders and others at the World Economic Forum, said that the U.S. has “virtually no inflation.”

“Grocery prices, energy prices, air fares, mortgage rates, rent and car payments are all coming down, and they’re coming down fast,” Trump said in a wide-ranging speech, adding: “We’ve done a hell of a job in 12 months.”

However, federal data suggests some of those claims are overblown.

Inflation is a measure of how fast prices are rising for consumers. The Federal Reserve, the U.S. central bank, aims for an annual inflation rate of around 2% over the long term.

The consumer price index, a key measure of U.S. inflation, was at a 2.7% annual rate in December 2025 — a rate that economists say remains elevated.

“To say the US has ‘virtually no inflation’ is factually incorrect and a classic Trump overstatement,” Thomas Ryan, a North America economist at Capital Economics, wrote in an e-mail.

Core CPI — a measure that strips out energy and food prices, which can be volatile — “remains uncomfortably high for policymakers at 2.6%,” Ryan wrote.

Mark Zandi, chief economist at Moody’s, also told CNBC that inflation remains “uncomfortably high.”

“Inflation is especially problematic for lower and middle-income Americans, given the high inflation for many staples such as groceries, electricity, apparel, furniture, childcare, and healthcare,” Zandi wrote in an e-mail.

Ironically, Trump’s tariff policy is putting upward pressure on inflation and preventing the U.S. policymakers from claiming victory, economists said.

Tariffs are a tax on U.S. imports, paid by the U.S.-based person or entity importing the goods.

The U.S. has an average effective tariff rate of 17.5%, the highest since 1932, according to the Yale University Budget Lab. The analysis includes a 10% tariff that Trump threatened to impose Feb. 1 on eight European allies if the U.S. is not given control of Greenland. Without factoring those Greenland-related tariffs in, the effective rate is 16.9%.

The effective tariff rate was around 2% at the beginning of 2025, economists said.

So far, businesses haven’t passed through their tariff costs to consumers as much as expected, economists said.

However, based on today’s tariff rate, the average consumer will pay an additional $1,300 to $1,700 in 2026, compared to what they would have paid before 2025, when Trump took office, said John Riccio, associate director of policy analysis at the Yale Budget Lab.

While inflation remains above the Fed’s 2% target, it’s “pretty close,” Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, wrote in an e-mail.

“Most economists think it would have been on target except for the tariffs,” he wrote.

Mortgage rates are significantly lower than where they were a year ago, helped in part by Trump’s push to have Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds.

Now, the average rate for a 30-year, fixed-rate mortgage is 6.21% as of Tuesday, according to Mortgage News Daily, down from over 7% in January 2025.

“That difference translates into roughly $1,800 per year in lower payments on a $300,000 loan, and tens of thousands of dollars less in interest over the life of the loan,” said certified financial planner Stephen Kates, a financial analyst at Bankrate. But since most people have fixed-rate mortgages, their rate won’t change unless they refinance or sell their current home and buy another property. 

In December, the national rent index fell 0.8%, ending the year with five straight months of declines, according to real estate data site Apartment List’s monthly report.

While this is generally in line with how rents perform in the winter, it was the steepest winter decline since 2022, according to the report. Across the board, rents nationally were down 1.3% compared to the year earlier. The national median monthly rent now stands at $1,356.

In some parts of the country, rent prices “have moved lower due to a surge in new apartment construction,” Bankrate’s Kates said. “Rental markets tend to respond more directly to supply and demand, while home prices are more sensitive to mortgage rates than to price levels alone,” he said.

Car payments, on the other hand, have been going up.

Although interest rates on new-car loans have edged lower, car shoppers are financing larger amounts. The average monthly payment on a new-vehicle purchase reached an all-time high in the fourth quarter of 2025 — hitting $772, up from $754 at the end of 2024, according to Edmunds. 

The share of new car buyers with a monthly payment of more than $1,000 also jumped to a fresh record, and the average amount financed for a new car notched a high of $43,759.

“The record-setting figures we’re seeing reflect the financial strain many buyers faced throughout the year,” Ivan Drury, Edmunds’ director of insights, said in a statement.

A gallon of regular gasoline costs about $2.81, on average, as of Jan. 19, according to the Energy Information Administration.

That’s a nearly 10% decline from $3.11 per gallon on Jan. 20, 2025, the day Trump took office, according to EIA data.

“Gasoline prices move with oil prices, set in global markets,” Gagnon said.

Global oil prices generally declined in 2025 as supply outstripped demand, the EIA wrote in January.

In the first half of the year, for example, oil prices fell due to slower economic activity, which can reduce oil demand, it said. Prices also declined amid expectations that “escalating tariffs among large economies could continue to slow economic growth,” it wrote.

But not all energy prices are falling.

Household electricity prices have surged, for example, partly due to the construction of energy-hungry data centers underpinning growth in artificial intelligence. Electricity prices are up nearly 7% over the past year, according to the consumer price index.

CPI data doesn’t include ancillary charges that are separate from purchases for basic economy seats, for example, she said.

“Those low base fares typically come with upcharges in the form of ancillary fees to check bags, to guarantee an aisle seat or to secure early boarding,” she wrote. “Those extra prices are not captured in this data — despite it still impacting one’s travel budget.”