Inflation In Trump’s World

Yesterday, we changed our stock market and economic projections owing to Trump’s “Reign of Tariffs”; today, we explain our thinking about the higher inflation we now expect. People’s expectations about future inflation are critical to how high inflation actually climbs since the expectations of economic actors alter their decisions, which Fed Chair Powell often points out. So will the Fed raise the federal funds rate to keep inflation expectations well anchored? Or will it cut the rate to keep the crisis from Washington from crippling economic growth? Our conclusion: Neither. We’re sticking with our “none-and-done” Fed forecast for this year.