US inflation held firm last month as Donald Trump faces mounting pressure over the cost of living for millions of Americans.
The closely watched consumer price index rose 2.7% in the year to December, in line with the previous month, according to official data published on Tuesday morning, ahead of a speech by the US president on the economy.
Chart of US inflation
The latest reading was broadly in line with economists’ expectations last month, and significantly above the Federal Reserve’s target for 2% inflation. Food prices and housing costs lifted the index higher in December.
On a month-to-month basis, CPI increased 0.3%. The so-called “core” index, which strips out volatile food and energy prices, rose 0.2% – growth that Samuel Tombs, chief US economist, said was “driven by the unwind of distortions” caused by the longest US government shutdown in history, “rather than strong underlying momentum”.
The Trump administration has claimed prices are falling, and blamed lingering inflation on the Biden administration, which left office almost a year ago. Inflation hit a 40-year high in the US in June 2022 at 9.1%, as economies across the globe grappled with rapid price growth due to distortions caused by the Covid pandemic.
Polls have shown consumers are shifting affordability blame on to the Trump administration. Twice as many Americans believe their financial security is getting worse rather than better, according to a Harris Poll conducted for the Guardian last month, and they are increasingly blaming the White House.
The president is due to deliver a speech on the economy in Detroit later on Tuesday. He has announced a series of eye-catching measures in recent days, including a cap on credit card interest rates and a ban on large institutional investors buying single-family homes, in a bid to address affordability concerns.
In a post on social media, Trump hailed “Great (LOW!) Inflation numbers” and appeared to claim that his controversial tariffs strategy – which many economists have warned risks driving up prices – was responsible.
Elizabeth Warren, Democratic senator from Massachusetts, said: “For a year now, Donald Trump has raised costs for families despite his promise to lower them ‘on day one’. Today’s data shows that inflation is still higher than it was when President Trump started his trade war in April. And annual inflation on groceries and utilities has risen compared to a year ago, hitting household budgets hard.”
The latest inflation data was released amid an extraordinary battle for control of the US Federal Reserve, which is tasked with steering the economy. Although the central bank cut interest rates three times last year, it defied Trump’s push for deeper cuts – prompting intense criticism from the president.
Jerome Powell, chair of the Federal Reserve, revealed on Sunday that the Department of Justice had served the Fed with grand jury subpoenas on Friday, threatening a criminal indictment, escalating fears about the Trump administration’s threats to the central bank’s independence.
