The Fed can’t pin inflation on Trump
Subscribe to enjoy similar stories. The Federal Reserve first blamed high inflation on the Covid-19 pandemic. Then the war in Ukraine became the accepted contrivance.
The Fed’s stories came wrapped in gauzy rhetoric about supply-chain disruptions. Now that these excuses have grown tired and outdated, leading monetary policymakers have developed a new scapegoat for inflation: President-elect Trump’s proposed tariffs. These explanations are untrue.
Inflation didn’t arise from war or pestilence. At the risk of speaking plainly, inflation arose from a government that spent too much and a central bank that printed too much. If the government lived with less, its citizens would live with more.
It’s worth clearing up some confusion about inflation. One-off changes in prices—owing to shocks and shifts—happen frequently. When a factory slows production or a port’s operations are interrupted, the supply of the affected goods shrinks and prices rise.
It isn’t the Fed’s job to interfere with price-setting in a market economy. But it is the Fed’s duty—designated by Congress—to ensure that changes in relative prices don’t become embedded in the economy. The Fed’s job is to stop second-order effects of price changes.
If high and rising prices beget still higher prices, the Fed hasn’t upheld its end of the bargain. That’s the real story of the past five years. Inflation has risen about 23% since January 2020.
According to the Fed’s often-favored core personal-consumption-expenditures price index, inflation is still running 40% higher than its own 2% inflation target. By other metrics, inflation is running hotter. The American people aren’t fooled by the suspect suppositions of economic experts who promised otherwise; nor by politicians
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