The Wall Street Journal editorial board questions Donald Trump’s understanding of monetary policy, arguing that his recent call for lower interest rates contradicts economic fundamentals. Trump’s demand came on the same day inflation rose for the third straight month, with CPI up 0.5% in January, pushing the 12-month rate back to 3%.
The Journal is gated, but here is the link if you can access it:
The editorial notes that higher tariffs, which Trump also advocates, typically fuel inflation, making rate cuts even less appropriate. Markets reacted accordingly, with the 10-year Treasury yield jumping to 4.63%, reflecting concerns that persistent inflation will keep the Federal Reserve cautious on easing.
While Trump isn’t to blame for inflation after just three weeks in office, the real policy error, according to WSJ, was the Fed’s premature rate cuts in late 2024, which drove long-term yields higher and failed to contain price pressures. Fed Chair Jerome Powell has since signaled patience in further cuts, and the editorial suggests Trump’s push for easier money could risk another inflation surge, undermining his own political standing.
AI can’t spell tariff.
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Meanwhile I’ll brace for the MAGA crowd disputing the Wall Street Journal’s understanding of economics 101.
