Why the White House Says Inflation Is 2.5%—and Why It’s Actually Higher

The next data on inflation are scheduled to be released on Dec. 18. Above, shoppers inside a grocery store in the Bronx borough of New York. (Kena Betancur/Bloomberg)

Key Points

• The White House says CPI inflation has fallen to an average 2.5% pace, down from 2.9% in January.
• Official CPI inflation measured 3% year over year in September, compared with a low of 2.3% in April.
• Core CPI and PCE inflation, the Fed’s preferred metric, also show increases.

The White House on Thursday claimed that inflation has fallen under President Donald Trump, but the true picture isn’t as cheery as the administration says it is.

U.S. statistical agencies produce two widely followed inflation measures: the Consumer Price Index, calculated by the Bureau of Labor Statistics; and the Personal Consumption Expenditures Price Index, from the Bureau of Economic Analysis. Both show that inflation has largely ticked up this year and is expected to end the year higher.

“The economy is getting better and brighter than where it was under the previous administration,” press secretary Karoline Leavitt told reporters on Thursday. “Inflation is down from where it was. As measured by the overall CPI, it has slowed to an average 2.5% pace. This is down from what the president inherited —the president inherited 2.9% in January.”

The issue is that by official standard calculations, inflation is nowhere near 2.5%. The BLS calculates the change in the consumer price index compared with one year earlier. In this case, inflation did measure 2.9% year-over year in January—and it hit its lowest pace of 2.3% in April.

But inflation has since risen again to measure 3% year over year in September, according to the BLS. Due to the government shutdown, October and November readings have been delayed and are due to be released on Dec. 18.

The gain in core CPI, which excludes food and energy costs and is considered a better indicator of inflation trends, was 3% in September.

PCE inflation, which is the Fed’s preferred metric, measured 2.6% year over year in January. In September, the figures was 2.8% compared with a year ago.

The 2.5% figure is the average of the annualized rates of monthly CPI growth from January through September. Treasury Secretary Scott Bessent has cited the same number.

While Trump likes to blame former President Joe Biden for the high inflation, that isn’t the whole story, says Peter Schiff, chief economist and global strategist at Euro Pacific Precious Metals. The worst of the inflation that the Federal Reserve is now battling came in 2021, during Biden’s first year in office, and the CPI had started to rise even before his inauguration, he says.

That indicates that at least some of the factors leading to higher price growth occurred during the first Trump administration.

The latest calculations from the White House simply don’t accurately capture the inflation levels that everyday households are dealing with, Schiff said.

The consensus call among economists surveyed by Bloomberg is that inflation was 3.1% in November, steady from the September reading. Core CPI is expected to post a 3% year over year gain for November, matching its September increase.

Write to Megan Leonhardt at megan.leonhardt@barrons.com