President Trump's promise to curb inflation is more complicated after January Consumer Price Index (CPI) Came in hotter than expected last week.
The report rushed markets, putting pressure on stocks while bonded products increased, as investors reduced expectations for cutting interest rate, while some even revived the possibility of hiking.
But never think of a hike – a delay rate in cutting it on its own could put President Trump on a “collision course” with the Federal Reserve, the former economist Nouriel Roubini warned.
“Even just keeping them back is going to put (Powell) on a collision course with Trump, because Trump wants to cut rates now,” Roubini said. “We already see those tensions, and they're going to accrue.”
Just before the inflation statement, Trump urged the Fed to lower rates, posting on social truth that reduced interest rates go “hand in hand” with its tariff agenda.
His call for lower rates comes despite repeatedly pushing back from the chairman of the Federal Fund Jerome Powell, who again signed this week that it is not in a hurry to cut interest rates. Speaking before Congress on Wednesday, Powell told house law makers, “I would say we are close but not there on inflation … we want to keep policy restrictive for the time being.”
And while Powell warned this week the “it would be unwise to guess” on the economic collapse of tariffs, Wall Street remains skeptical of the Trump policy agenda. Roubini doubled down on his warning that the proposed Trump Administration policies – including tariffs – back by adding to current inflationary pressure, while the chief economist analytics of Moody Mark Zandi warned Users will “bear the burden.”
“Tariffs, protectionism, economic war with our friends and allies, and also with China, are inflation and reduce growth,” Roubini explained.
And Zandi echoed concerns that Trump's tariffs will add to the pressure of inflation, telling me that Trump's tariff offers will fires higher inflation, raise interest rates, and reduce economic growth – factors that would “complicate” policy decisions that are on the coming of the Federal Fund.
Zandi sees this risk elevated following January CPI print, which showed “disinfection ending” as prices increase across a number of sectors, including energy, food, cars and second -hand trucks, and motor vehicle insurance.
“The broad nature of the price is increasing … it's something to worry about in terms of tariffs,” Zandi said on Yahoo Finance morning brief. “The disinfectant we had been enjoying now over, and unfortunately we are not entirely back to the Federal Fund target, so that is irritable.”
