The US inflation rate increased in three of the previous four months and is higher than a year ago when it helped sink Kamaly Harris’s presidential campaign. However, current President Donald Trump claims that inflation has been defeated. TASR informs this on the basis of AP report.
“Food prices are falling, mortgage rates are falling and inflation has been defeated,” said Trump at the end of last month. Even the chairman of the Central Bank Fed Jerome Powell, who faced pressure from Trump for months, in August, just before the Fed for the first time this year reduced its key interest rate, he said: “Inflation, although it is still increased, it has fallen significantly from the maximum after the pandemic. The risks of inflation growth decreased.”
However, the downplay of the fact that inflation is still above the target level of the Fed, which is 2 %, is a great risk for both White House and Fed. Surveys show that many Americans still perceive high prices as a great burden for their finances.
The Fed has reduced the key interest rate based on the assumption that Trump’s duties will only cause a temporary increase in inflation. If this turns out to be incorrect and inflation will deteriorate or stays increased longer than expected, it could endanger the credibility of the Fed in the fight against inflation.
It is this credibility that plays a key role in the Fed’s ability to keep prices stable. If Americans are convinced that the central bank can maintain inflation at bay, they will not take steps (for example, the requirement of significantly higher wages when prices are rising) that could run an inflationary spiral. Companies often increase prices to compensate for higher labor costs.
The duties have not yet increased inflation in the US, as many economists have been feared at the beginning of the year. It also remains deep below the top three years ago at 9.1 %. Nevertheless, the inflation rate in August 2025 reached 2.9 %. It was thus higher than 2.6 % at the same time last year and still holds relatively high above the two % destination of the Fed.
The government is to publish a report on September inflation next week, but the data is likely to be delayed to suspend the activities of government agencies and institutions. Customs have increased the prices of many products, while some of the daily consumption goods grew faster than before the pandemic. Food prices increased by 2.7 %in August, as much as the pandemic period since 2015.
For example, coffee prices jumped by almost 21 %, partly because Trump introduced a 50 %import duties for Brazila leading coffee exporter. And also because the dry climate change has reduced the crop of coffee beans.
Most Fed representatives are still worried that inflation is too high, according to the minutes of the Fed meeting from 16-17 September. Nevertheless, they decided to reduce the key interest rate, as they were more concerned about the risk of worsening unemployment than higher inflation. However, some economists are concerned that the introduction of duties and their impact on prices could lead to more than a temporary increase in inflation.
