President Trump's Inflation Promise Faces Complexity After CPI Report
President Trump's pledge to curb inflation faces challenges following a surge in the January Consumer Price Index (CPI). The report has rattled markets, leading to pressure on stocks and soaring bond yields.
Federal Reserve Conflict
Economist Nouriel Roubini warns that a delayed rate cut could escalate tensions between Trump and the Federal Reserve. Fed Chair Jerome Powell has indicated reluctance to cut rates prematurely, despite Trump's repeated calls for action.
Tariffs and Inflationary Pressures
Trump's tariff agenda, despite resistance from Powell, risks backfiring by contributing to inflationary pressures. Moody's Analytics chief economist Mark Zandi and Roubini both express concerns about the potential for higher prices and reduced economic growth.
Tariff Implications
Moody's Analytics projects a 0.5% increase in consumer price inflation if tariffs are implemented fully. Real GDP could decline by 0.6% within a year, while the trade war poses risks to equities.
Market Constraints on Trump
Roubini anticipates limited downside risk from Trump's policies due to market discipline, Fed independence, and bond vigilantes. Investors will punish policies detrimental to growth and inflation, acting as a constraint on Trump's actions.