Price growth unexpectedly surged in January, bringing an early challenge to President Donald Trump’s economic agenda.
Inflation in so-called core items, which excludes unstable food and energy prices, has risen 3.3% over the past 12 months, the Bureau of Labor Statistics reported Wednesday, surpassing economists’ expectations by 3.2%. Each month, inflation indicators rose 0.4%, exceeding the 0.3% forecast.
Trump has promised that the White House will regain its vows to decline “quickly” and that he will start voters on the campaign trail “from day one.” However, the president, 24 days after his new term, took responsibility for his predecessor on Wednesday morning, wrote on his true social platform, “Biden Inflation Up!”
The BLS Report survey period does not cover Trump’s first few weeks, but fresh data suggests that the challenge of slowing price growth could be more difficult than Trump and many economists have hoped for. It shows that there is.
Egg prices rose by more than 15%. This was the biggest jump since 2015 and was heavily promoted by the outbreak of avian flu. Housing costs, vehicle insurance, airfares and education prices also rose as prices for appliances, furniture and many types of apparel fell.
There are indications throughout the consumer economy that many households are pulling back. McDonald’s reported the biggest sales decline since the pandemic on Monday. As airline ticket prices rise, low- and middle-income consumers are adjusting their travel plans for the year. Even the alcohol sales are slipping.
After the inflation report, the market fell on Wednesday morning, with the Dow dropping about 400 points in pre-market trading. Borrowing costs, exemplified by the US Treasury’s 10-year bond, have risen.
Over the past few months, the Federal Reserve has been raising interest rates to keep inflation at bay. However, just before the release of the report, Trump wrote about the true social:
Lowering interest rates will allow consumers and businesses to increase room for spending and investing, but risk rekindling inflation.
But at least one Trump economic adviser has shown that the administration may be considering curbing overall consumption. Kevin Hassett, director of the National Economic Council, told CNBC on Monday that demand could be reduced and increased labor supply could cope with the pace of price growth.
The market has ignored these statements up until now. Instead, many investors have zero on the uncertainty created by Trump’s trade policy. On Monday, he announced a 25% tariff on all steel and aluminum imports. Last month, Trump announced an additional 10% collection of all products from China.
“We continue to believe that the Trump administration’s trade, fiscal and immigration policy agenda is mildly inflationary,” Bank of America analysts said in a new memo to clients.
Federal Reserve Chairman Jerome Powell on Tuesday said on Capitol Hill that the economy is “overall strong” as central banks have made “great progress” towards a 2% target over the past two years. Ta. He told the Senate that the Fed is well positioned to adjust interest rates according to how economic growth evolves, but it has shown that it is ready to keep them high for longer. .
“If the labor market is unexpectedly weakened or if inflation drops faster than expected, we can easer policy accordingly,” Powell said.
Neil Dutta, head of economic research for Renaissance macro consultants, said in a recent memo that uncertainty about White House policies has been overestimated compared to other looming constraints on growth. Consumers have cut their savings not only by federal government policies, but also as states face budget constraints, so that public sector spending is set to fall.
“Uncertainty is growing while the economy is slowing,” Dutta writes.