Inflation Trends and Misleading Claims: A Closer Look

Inflation has resurged, impacting the budgets of many Americans. By April, inflation reached 3.8% from the previous year, marking the highest in three years, according to the latest data. Financial commentator Larry Kudlow questioned Kevin Hassett, director of the National Economic Council, about the seriousness of inflation. Hassett claimed that inflation is decreasing, particularly if excluding states like New York and California. However, data reveal a different scenario.

Inflation’s Geographic Impact

Hassett stated, “Inflation is really out of control in the blue states,” suggesting that excluding New York and California presents a different picture. “High costs and high regulatory states are driving inflation,” he added. But this claim is based on outdated information. Inflation remains high across all nine regions defined by the Census Bureau. Rising gas prices due to conflict in the Middle East have not only increased air fares but also raised shipping costs, affecting grocery prices. Clothing costs have risen, potentially due to the effect of past tariffs.

“Gas is going up in every state,” said Omair Sharif, chief economist at Inflation Insights. “It’s not a blue state story.”

Although Hassett referenced a report from the White House Council of Economic Advisers showing modestly higher inflation in blue states, the data is outdated. The report was released before the Iran conflict, which started in late February, leading to gas prices rising over 40% nationwide, thus removing any previous regional inflation differences.

Comparing Inflation by Region

The Labor Department’s consumer price index data show a more complex regional picture. The Pacific region, mostly blue states, saw annual inflation of 3.5% in April, less than the national 3.8%. Meanwhile, the East South Central region, comprising all red states, had a rate of 4.5%, higher than the national average. The West South Central region had a 3.2% rise in consumer prices compared to previous years, a significant climb from pre-pandemic rates.

States like California and New York do face higher price levels overall but not necessarily higher inflation rates. For example, while gas prices in Texas averaged $3.72 per gallon in comparison to California’s $5.98, the rate of increase over the year was greater in Texas (36%) than in California (26%).

Core Inflation Misinterpretations

Hassett also commented on core inflation trends, suggesting a downward move toward the Federal Reserve’s target by focusing on trimmed mean data. Yet, core inflation according to the consumer price index rose from 2.5% in January to 2.8% in April. The core excludes food and energy prices to illustrate underlying trends. Although core figures usually align with the headline number over time, a broader upward pressure persists.

The Federal Reserve’s preferred metric, the personal consumption expenditures price index, showed an increase in core inflation from 3.1% in January to 3.3% in April. Despite slight decreases in trimmed means, experts caution against relying solely on this measure.

According to a White House official, core inflation remains lower than figures from January 2025, despite recent increases. The trimmed mean cited by Hassett is getting attention due to its advocacy by Kevin Warsh, the Federal Reserve chair appointed by President Trump. It disregards large price changes to provide a broad inflation trend. However, it may mislead when inflation spikes, as seen in 2021.

The Dallas Federal Reserve calculates this trimmed mean, noting a decrease since early this year to 2.3%, near the Fed’s goal. Yet, Lorie Logan, Dallas Fed president, highlighted potential misinterpretations. Meanwhile, a separate trimmed mean from Cleveland Fed data ascended from 2.6% to 2.8% recently.