The stunning rebound from the pandemic over the past four years will not be enough to keep Democrats in the White House. Now, Donald Trump is returning with a host of economic winds, and wallet-conscious voters are watching how he handles them.

The president-elect inherited an imperfect economy, but he has eagerly positioned himself as the solution to its shortcomings.

For countless families, the unavoidable costs of housing, child care, health care and more remain high, and Trump successfully eased their frustrations during the campaign — when he said, “Trump will fix this.” issue" was held at a large rally. sign. He promised to cut energy costs in half within his first year in office and free up more housing by expelling millions of immigrants from the country.

However, the cost of many everyday goods and services has slowed significantly, and workers' average earnings are more than enough to cover the rising costs. Since inflation peaked at 9.1% in June 2022, annual growth in consumer prices is now below 3% and has been hovering just above the Fed's 2% target rate for months.

But December's 2.9% reading is the latest sign that the final mile of inflation's road may be bumpy.

Price increases accelerated in the final months of the Biden administration, after hitting 2.4% in September, the lowest level since February 2021. Food costs have risen every month since August, stalling after improving sharply earlier last year. Indeed, Trump relentlessly highlighted grocery prices after the election, saying it would be "very difficult" to lower them further.

A surge in energy prices pushed inflation up 40% last month, but it remains cheaper than a year ago. The price increases are largely driven by gasoline and heating oil, while utility bills are expected to rise nearly 9% during the season as home heating costs rise.

At the same time, ironically, the underlying strength of the labor market and the overall economy may be hampering efforts to lower inflation.

To shore up its record, the Biden administration last week released a Treasury Department analysis highlighting that "labor market, household and business indicators are all at levels typical of economic prosperity, with some indicators -- including prime age (ages 25 to 54) )” labor force participation rate, median household wealth, and business adoption—are at or near all-time highs. "

These measures are undoubtedly being watched closely by monetary policymakers at the Federal Reserve, who have a history of lowering interest rates to shore up a weakening economy. But with things broadly moving forward, they are keenly aware that a premature or excessive boost could offset hard-won progress and send prices higher again.

What happens next also depends on the policies Trump implements soon after he is sworn in for the second time.

He said his tax and immigration crackdown proposals are top priorities. Corporate executives are eager for the former, especially with plans to combine lower corporate tax rates with deregulation. Economists say Trump's vow to detain and deport millions of undocumented people could send shockwaves to major industries that rely heavily on immigrant labor, particularly agriculture, health care and construction.

Trump’s tariff plans are another wild card that threatens to inflame diplomatic tensions with allies and rivals and raise costs for businesses ranging from tech startups to craft breweries and bicycle manufacturers. Given these unknowns, market experts are lowering their expectations for the pace of further rate cuts from the Federal Reserve.

Wells Fargo economists wrote in a recent note to clients: "We believe the resilience of the U.S. labor market, the stickiness of inflation, and the uncertainty surrounding federal economic policy will keep the Federal Open Market Committee on track in the coming years. No action will be taken within a month." Establishing the Federal Open Market Committee.

Economists at BNP Paribas even think the Fed will stay on hold for the rest of the year. "We continue to expect no rate cuts in 2025 as inflation surges due to new government policies," they wrote to clients. That would keep borrowing costs on credit cards, auto loans and a variety of other rates tied to the Fed's benchmark Staying at uncomfortably high levels. The yield on the 10-year Treasury note, upon which mortgage rates are based, is also rising.

Then there is the national mood. Trump has won the trust of most voters and handled the economy better than his predecessor. Despite longstanding partisan differences on the issue, he will have plenty to do to reverse the continuing deterioration of the outlook shared by millions of people.

"Inflation is improving, but most people don't agree," said Greg Valliere, chief U.S. policy strategist at AGF Investments. He added that there could also be a conflict between Trump and Fed Chairman Jerome Powell, with Trump having said he would not try to remove Powell from the Fed until his term ends in May 2026. Removal.

"Trump undoubtedly thinks he's going to get a few rate cuts in 2025, but he might get none, or just one or two," Valliere said. "He and Powell have a history of feuding and if the Fed refuses to cut rates, , the feud could flare up again."

Still, context is crucial. Inflation averaged 2.9% for all of last year, down from 3.3% for all of 2023 and below the long-term average of 3.5%, said Kevin Gordon, investment strategist at Charles Schwab. level.

It’s a favorable trend, but it can be difficult for people to see what’s happening in the world where they live, work, shop and vote — or for politicians to continue promising changes after taking office.