By Chinonyerem Emmanuel
In a bold address at the World Economic Forum in Davos, Switzerland, President Donald Trump proclaimed that he has “defeated” inflation, asserting that everyday consumer costs from groceries to gas are dropping rapidly. Speaking to a global audience of world leaders, business executives, and economists, Trump painted a picture of a U.S. economy under control, with “virtually no inflation” and expenses steadily declining.
“Grocery prices, energy prices, airfares, mortgage rates, rent, and car payments are all coming down and they are coming down fast,” Trump said during his speech Wednesday, adding, “We have done a hell of a job in 12 months.”
However, economists caution that these claims may overstate the reality for many American households. While certain costs have indeed fallen compared to last year, others remain stubbornly high, keeping financial pressure on families across the nation.
The Economic Reality Behind the President’s Claim
Inflation is measured by how quickly prices rise for consumers, and the Federal Reserve, the U.S. central bank, targets an annual rate of about 2 percent over the long term. The latest data from December 2025 shows the consumer price index, a key measure of inflation, at 2.7 percent annually, a rate economists describe as elevated.
“To say the U.S. has virtually no inflation is factually incorrect and a classic Trump overstatement,” said Thomas Ryan, North America economist at Capital Economics. Even the core CPI, which excludes volatile food and energy prices, remains high at 2.6 percent, indicating persistent inflationary pressures.
Mark Zandi, chief economist at Moodys Analytics, emphasized that inflation continues to hit lower and middle income Americans hardest, particularly in essential areas such as groceries, electricity, apparel, furniture, childcare, and healthcare.
Ironically, economists also point out that Trump’s aggressive tariff policy may actually be contributing to higher costs for consumers. Tariffs, essentially taxes on imported goods, have reached an average effective rate of 17.5 percent, the highest since 1932. Analysts estimate that these tariffs could increase the average consumer’s annual costs by 1,300 to 1,700 dollars in 2026, compared with pre-2025 levels.
Breaking Down Key Consumer Costs
Mortgage Rates
Mortgage rates have dropped compared to last year, partly due to Trump’s directive for Fannie Mae and Freddie Mac to purchase 200 billion dollars in mortgage bonds. The average 30 year fixed rate mortgage is now 6.21 percent, down from over 7 percent in January 2025. For a 300,000 dollar loan, this translates into roughly 1,800 dollars in annual savings and tens of thousands in interest over the life of the mortgage.
However, most Americans with fixed rate mortgages will not see further changes unless they refinance or move.
Rent
Rent payments have also trended downward, with the national rent index falling 0.8 percent in December, marking the fifth consecutive month of declines. On average, national rents are down 1.3 percent year over year, and the median monthly rent is now 1,356 dollars. This decrease is partly due to new apartment construction increasing supply, which has helped ease rental pressures.
Car Payments
New car payments, however, tell a different story. Despite slightly lower interest rates, Americans are financing larger amounts, driving the average monthly payment on new vehicles to a record 772 dollars, up from 754 dollars a year ago. The average loan amount for a new car hit 43,759 dollars, reflecting the ongoing financial strain on buyers.
Energy Costs
Gasoline prices have fallen nearly 10 percent since Trump took office, averaging 2.81 dollars per gallon. Global oil supply outpacing demand contributed to this decline. Conversely, household electricity prices have surged nearly 7 percent over the past year, driven by high energy consumption from new infrastructure like data centers supporting artificial intelligence growth.
Groceries
Grocery prices rose a relatively modest 2.4 percent over the past year, but some items, such as beef and coffee, saw much sharper increases due to supply constraints and extreme weather impacting major producers.
Airfares
Airline fares fell more than 3 percent year over year in December. Lower jet fuel costs and reduced travel demand contributed to the decline, though additional fees, such as baggage and seat selection, can still make travel expensive for many consumers.
Economists Urge Caution
While some everyday costs have indeed softened, economists say the overall inflation picture is more complex. Tariffs and energy costs continue to put upward pressure on prices, particularly for essential goods and services.
“Inflation remains uncomfortably high, and many Americans still feel the pinch in their daily expenses,” said Zandi. “The idea that it has been fully defeated is not supported by the data.”
Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, added that without the tariffs, inflation might have been closer to the Fed’s 2 percent target, but external factors and policy decisions complicate the picture.
Bottom Line
President Trump’s declaration of victory over inflation in Davos is likely to energize his supporters and spark debate among economists and policymakers. While certain costs like mortgages, rent, and gasoline have seen meaningful declines, other essential expenses such as electricity, groceries, and car payments continue to weigh heavily on households.
For now, Americans are left balancing the mixed signals from political leaders and economic reality, navigating a financial landscape where some prices are falling but others remain stubbornly high.
Source: CNBC
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