The Federal Reserve’s tightening monetary policy has created challenges for cryptocurrency enthusiasts, with the institution seemingly shifting blame for inflation to external figures. As interest rates have seen rapid increases, a new perspective is forming that suggests the Fed may soon point to former President Trump as a scapegoat for the ongoing inflationary pressures.
How Is Trump Connected to Inflation?
In recent times, the Fed has identified various external factors to excuse inflation, rather than acknowledging its own shortcomings. The narrative has shifted from blaming COVID-19 to the impact of the Ukraine war and supply chain disruptions. However, as inflation persists, the focus could soon pivot to tariffs proposed by Trump, particularly in light of planned policies for 2025.
Why Is Inflation Rising?
The inflation in the U.S. can largely be attributed to extensive government spending, alongside an increase in money supply. As production slows and supply chains face challenges, the cost of goods rises. Notably, it remains outside the Fed’s mandate to intervene in price adjustments. Since early 2020, inflation has jumped by 23%, with core PCE data showing it significantly exceeds the target rate.
- Federal spending rose by 52% since 2019.
- National debt escalated by over 50% since early 2020.
- Interest costs reached $3 billion daily as rates increased.
- The Fed’s balance sheet grew by 65% during this period.
The idea of attributing inflation solely to Trump’s tariffs, especially given the U.S.’s trade reliance on China, serves as a convenient cover for the Fed. Trump’s proposals focus on reducing national expenditures, which could ultimately provide a clearer path to mitigating inflation. However, skepticism remains, as the anticipated short-term effects of tariffs may be limited.
Despite the Fed’s recent 50 basis point rate cut, mortgage rates still hover above 7%, illustrating a disconnect. This situation suggests that any reductions in the Fed’s rates may not translate into immediate relief for mortgage holders.
