‘We don’t have inflation’? Five charts show the US economic reality of Trump’s second term so far - The Guardian

Inflation measures how quickly prices are rising across the economy. It does not measure whether prices are cheap or expensive. When inflation falls, prices usually keep rising, but they rise more slowly. That distinction matters because families still pay today’s accumulated prices, even after inflation cools.

For example, inflation peaked at 9.1% in June 2022. It fell to 3% in January 2025 and 2.3% by April. However, groceries, fuel, housing, and other goods did not return to their 2021 prices. The rate of increase simply became smaller.

This is why voters can feel squeezed even when economic reports show improvement. The article says inflation reached 4.2% in May after the Iran war and stayed above 3.4%. Lower inflation would slow new price increases, but it would not automatically reverse earlier increases.

Inflation has fallen substantially from its 40-year high, but the improvement has not been steady. It peaked at 9.1% in June 2022, then declined to 3% in January 2025 and 2.3% in April. That means the inflation rate fell by 6.8 percentage points from its peak to April 2025.

The later path was rougher. After tariffs were placed on nearly everything the United States imports, inflation rose to 3% in September 2025. It then dropped to 2.4% in January and February 2026 after many tariffs were paused or found illegal. The Iran war later pushed inflation to 4.2% in May.

The Federal Reserve’s widely recognized target is 2%. Thus, 2.4% was close but above target, while 4.2% was more than double it. The article says inflation has remained above 3.4% since May.

Gas prices respond to global oil markets, not only to how much oil the United States produces. The Strait of Hormuz is a major shipping route, and the article says about one-fifth of the world’s oil typically passes through it. When the route was blocked after the Iran war began, supplies became harder to move and prices rose worldwide.

That global shock reached American drivers even though the United States is a major oil producer. The average US gas price reached $4.32 per gallon in mid-October, nearly $1.30 higher than a year earlier. Texas prices rose to $3.81 from $2.64, while California reached $6.21.

The mechanism is international competition for available fuel. A disruption reduces or threatens supplies, pushing buyers to pay more. Those higher oil costs feed into gasoline prices. The article presents the Strait’s closure as the central reason gas prices surged.

A tariff is a charge placed on imported goods. Importers and businesses often face higher costs when tariffs apply. They may pass those costs to customers through higher prices, especially when imported products or materials are difficult to replace. Broad tariffs can therefore add pressure across many parts of the economy.

The article connects Trump’s tariffs with renewed inflation. After tariffs were placed on nearly everything the United States imports, inflation climbed from 2.3% in April 2025 to 3% in September. Employers also faced higher prices for supplies, which contributed to slow job growth.

After many tariffs were paused and eventually found illegal, prices started going down again. Inflation returned to 2.4% in January and February 2026. Pausing tariffs can reduce new cost increases, although it does not necessarily return prices to their earlier level. Other shocks, such as the Iran war, can still push inflation higher.

A “low-hire, low-fire” job market is one where employers are cautious in both directions. They are not adding many workers, but they are also not dismissing many people. This can make the unemployment rate look stable while job seekers find fewer openings and economic momentum weakens.

The article reports that the United States added 181,000 jobs in 2025, compared with 2.2 million in 2024. Yet unemployment stayed just over 4%. Harsher immigration policies, tariff uncertainty, and higher supply costs made employers more careful about hiring.

The result is a labor market that appears stable but feels less dynamic. People who already have jobs may remain employed, keeping unemployment low. At the same time, newcomers and unemployed workers may struggle to find positions. If cautious hiring continues, wage growth and household confidence could weaken even without a large wave of layoffs.

The S&P 500 reflects the value of major publicly traded companies, not the financial health of every household. A rising market can increase wealth for people who own shares, but it does not directly lower rent, groceries, gas, or loan payments. Stock gains are therefore distributed unevenly.

The article says AI investment has driven much of the market’s acceleration. Technology companies are spending billions on data centers and chips. While many Americans own stocks through retirement or pension funds, the wealthiest 1% own nearly half of stock-market investments. They receive the largest benefits when prices rise.

This produces what economists call a K-shaped economy. One path points upward for wealthy investors, whose assets grow. The other points downward or stays strained for households facing high prices and tight budgets. The article says the market recovered from tariff-related and Iran-war dips, even as many Americans reported financial difficulty.

The Federal Reserve uses interest rates as a major economic balancing tool. When inflation is too high, it can raise rates to slow borrowing and spending. When employment and growth weaken, it can lower rates to encourage loans, investment, and demand. The goal is to control price increases without causing unnecessary job losses.

Higher rates increase the cost of mortgages, car loans, credit, and business borrowing. A household may face a larger monthly payment when financing a home or vehicle. A business may delay equipment purchases or expansion because its loan costs are higher. These decisions reduce spending and can gradually cool inflation.

The article says higher interest rates have made loans and mortgages more expensive for Americans. It does not provide specific rate levels or explain the Federal Reserve’s decisions in detail. If rates stay high, inflation may ease but borrowing and economic activity can remain pressured.