The Wall Street Journal Editorial Board writes,
Trumponomics and Rising Inflation
The President calls for easier money even though consumer prices keep rising. Does he want even higher prices?
The Editorial BoardFeb. 12, 2025 at 5:33 pm
“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” Mr. Trump posted on his social-media site. The layers of intellectual confusion here are hard to parse, especially since higher tariffs will mean higher prices on the affected goods. But perhaps the President wants the public to look elsewhere when assigning blame for rising prices.
Yet if he’s trying to blame the Federal Reserve, which controls short-term interest rates, he has the analysis backward. Rising inflation means the Fed must be more cautious in cutting rates. This is how financial markets read the news that the consumer-price index (CPI) rose 0.5% in January. Long bond rates rose sharply, with the 10-year Treasury note popping to 4.63% from 4.53%. This reflects market worry over inflation.
The concern is warranted based on the trend in CPI, which has risen each month since a 0.2% increase in October. The 12-month increase in CPI is now back to 3%, up from a recent trough of 2.4% in September. So-called core prices, less food and energy, rose 0.4% for the month and are now up 3.3% over the last 12 months.
The price increases were broad-based, hitting insurance, used cars and trucks, airline fares, medical care, haircuts, day care, sporting events, cable television, and more.
Mr. Trump isn’t responsible for this after only three weeks in office. But someone should tell him that the mistake goes back to the Fed’s premature interest-rate cut of 50 basis points in September. Long bond rates shot up immediately and have stayed higher, but the Fed still cut another 25 points in November.
Fed Chair Jerome Powell seems to recognize that mistake because he has been saying for weeks that the central bank is in no rush to cut further. The last thing Mr. Trump should be doing now is demanding that Mr. Powell cut rates further and faster—unless the President wants inflation to resume its Biden-era climb.
The Powell Fed is likely to ignore Mr. Trump, and well it should. But the President’s demand illustrates another risk of Trumponomics. As a real-estate investor, Mr. Trump has long been an easy-money guy. He likes low rates and a weak dollar, which could lead to higher prices, all other things being equal.
As a political matter, an inflation revival may be the biggest threat to the Trump Presidency. Mr. Trump was elected as voters reacted to inflation and falling real incomes under Joe Biden. Real average earnings are flat over the last three months as inflation has bounced up. If this persists, Mr. Trump won’t have a 53% job approval rating for long.
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