Hold on!!!
The tariffs are coming, the tariffs are coming! Which means inflation is coming, inflation is coming! Therefore, higher interest rates are coming, higher interest rates are coming!
Right? Well, maybe and maybe not. When’s the last time all the economists have been right?
Currently the page one hot topic is the price of eggs. Eggs are the “new” toilet paper of a few years ago. Hoarding is happening with shelves empty and prices for a dozen eggs now going through the roof. To be clear, tariffs (or the threat thereof) do not have anything to do with eggs. Bird flu. Yup, you kill the chickens you get no eggs. Nothing to do with inflation. Interesting, the price of eggs jumped up but the actual cost of a pound of chicken not so much. Hmmmm.
So will inflation raise it’s ugly head again? It never really left, ya know. The Fed, with fearless leader J. Powell, did frantically raise interest rates quickly to try and get inflation back to their 2% target. They achieved getting inflation down to roughly 3% BUT then said “close enough.” We win.
Well…..not so fast. The Fed let the flames simmer but never totally put out the fire.
President Trump is now following through on campaign promises to enact tariffs on countries (friend and adversary alike) where the U.S. has large trade imbalances. He is also quite adamant about having lower interest rates. Something’s going to give. Should broad based tariffs be fully implemented (not likely), certainly higher costs on foreign goods would ensue (inflationary) AND if interest rates were lowered, inflation would spike higher.
Enacting tariffs is easy (pen, please) but getting J. Powell and the Fed to ease interest rates……….well THAT could get messy. A bitter fight between the President and the Chair of the Fed would certainly throw the financial markets into a “tizzy.” Inflation would be left unchecked. Perhaps that is why gold has been on a straight up rally.
On the other hand, maybe the economic plan laid out by President Trump works beautifully. “Armchair quarterbacking” against Trump (a businessman and billionaire) and a “posse” of some of the smartest people on the planet (hello Elon) seems somewhat foolish. Perhaps that’s why financial markets are slow and subdued, waiting for more clarity.
If things don’t go perfectly…………well, inflation will roar.
OH NO……NOT AGAIN!!
And here we are.
