OPINION:
The consumer price index report for December delivers three clear conclusions: Tariffs are not driving inflation, overall inflation is running near the Fed’s target and the data supports a rate cut at the Fed’s Jan. 28 meeting.
Start with the top line. Headline CPI rose 0.3% last month, exactly in line with expectations. Core CPI, excluding food and energy, rose 0.2%, below expectations.
Zoom out, and the contrast is unmistakable. Inflation is now near the Federal Reserve’s 2% target and a long way from the roughly 7% peak reached during the Biden years. That turnaround is the result of a democracy-driven regime change. Elections matter.
The composition of inflation reinforces the point. Core goods prices were unchanged in December and remained modest year over year. Despite repeated warnings, the feared pass-through from tariffs simply does not appear in the CPI data. If tariffs were driving inflation, then goods prices would be leading the index higher. They are not.
Inflation challenges now have become more concentrated, and President Trump is aggressively moving to address them.
Food prices rose 0.7% in December, continuing a pattern in which grocery and restaurant prices have been climbing faster than inflation overall. Yet this remains Biden legacy inflation.
For example, cow-hating President Biden deliberately slashed grazing access on federal lands as part of a climate agenda hostile to cattle production. It was a war on cows and burgers, and Mr. Biden tightened supply in a way that pushed beef prices higher.
With Agriculture Secretary Brooke Rollins and Interior Secretary Doug Burgum leading the charge, Mr. Trump is rapidly expanding grazing access on federal lands. Meanwhile, Attorney General Pam Bondi has ordered the Justice Department’s Antitrust Division to crack down on foreign-dominated beef cartels that distort prices from slaughterhouse to supermarket.
On energy, while gasoline prices declined in December, natural gas prices rose and electricity costs remain elevated year over year. Here again, the administration is focused on supply fundamentals.
For example, Mr. Trump’s Venezuela initiative will increase imports of heavy crude that U.S. Gulf Coast refineries are built to process. Greater refinery efficiency increases output and lowers marginal costs — precisely the mechanism needed to reduce fuel price volatility and ease household energy bills over time.
Housing remains the largest contributor to core inflation. Even as the long-term trend continues to ease from the peaks reached under the prior administration, Mr. Trump is attacking housing costs on multiple fronts.
He has moved to ban hedge funds and large institutional investors from bulk purchases of single-family homes, a practice that has pushed home prices and rents higher. He has ordered Fannie Mae and Freddie Mac to purchase up to $200 billion in mortgage-backed securities, which will lower mortgage rates by 25 to 50 basis points.
He is moving aggressively to expand housing supply, taking direct aim at onerous state and local regulations that choke off new construction.
Finally, Mr. Trump is explicit about a key Biden legacy driver of housing costs that a woke Washington and legacy media too often avoid naming: illegal aliens.
Rapid, large-scale inflows of illegal migrants — roughly 20 million under the Biden-Harris-Newsom open-border regime — drove housing demand higher, especially in already tight rental markets. Each additional 1 million illegal immigrants raises rents by about 1%. That’s a roughly 20% national rent increase attributable to open borders, with even sharper spikes in sanctuary cities such as New York, Chicago and Los Angeles.
The irony is glaring. Democrats such as New York Mayor Zohran Mamdani, Illinois Gov. J.B. Pritzker and California Gov. Gavin Newsom cheer open borders, enforce sanctuary policies and wage war on U.S. Immigration and Customs Enforcement. When rents explode, they campaign on “affordability.” They don’t build housing; they manufacture a housing crisis and then shamelessly run against the damage they are causing.
Mr. Trump, with Homeland Security Secretary Kristi Noem leading the charge, is deporting the problem by removing artificial housing demand and setting the stage for easing rent inflation. Border security, in this context, is housing affordability.
Put together, the December CPI report points in one direction. Inflation is stable. Goods prices are under control. Remaining pressures are narrow and targeted by policy. The conditions that justified restrictive monetary policy are no longer present.
The data supports a rate cut at the Federal Reserve’s Jan. 28 meeting — now, not later.
• Peter Navarro is the White House senior counselor for trade and manufacturing. www.peternavarro.com.
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