Inflation helped Trump get elected. Now it’s his problem.
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Subscribe to enjoy similar stories. Nothing did more to deliver the White House to Donald Trump than inflation, which helped to sour Americans on former President Joe Biden’s economy. Inflation is turning into a headache for President Trump, too.
It is proving stubborn, just as he and fellow Republicans are rolling out their marquee policies of higher tariffs and lower taxes. The aggregate boost to inflation from tariffs is likely to be small and from tax cuts smaller still (especially if they are offset with spending cuts). The problem is that Trump has inherited inflation above the Federal Reserve’s 2% target, and his agenda risks keeping it there, making it harder to bring down interest rates.
This is in contrast to his first term, when inflation generally ran at or below 2%. So while Trump raised tariffs and cut taxes in his first term, the effect at the time was to help the Fed meet rather than miss its inflation target. The latest data underscore the challenge.
Core consumer price inflation, which excludes its volatile food and energy components, was 3.3% in January, higher than economists had expected. That same month, hourly wages jumped. And a survey by the University of Michigan showed higher expected inflation in the coming year.
Caveats are in order. The January price jump was concentrated in auto-related components and airfares, which might reverse, perhaps in February. The Fed targets a different core inflation measure that was likely around 2.6% in January.
The wage jump might reflect weather distortions. And a Fed survey doesn’t show inflation expectations rising as much as the University of Michigan did. “We’re close but not there on inflation," Fed Chairman Jerome Powell told lawmakers Wednesday.
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