An economist argued Saturday that President Donald Trump’s only hope of lowering inflation before the midterms will likely make him very, very mad.
Professor of economics Justin Wolfers, who writes the Platypus Economics Substack, made the assessment during an appearance on CNN on Saturday. He explained that markets are already behaving like they expect the Federal Reserve to raise interest rates.
Trump has called on the Federal Reserve to lower interest rates for a while, a demand that even fueled his feud with former Fed Chairman Jerome Powell. Trump has touted current Fed Chairman Kevin Warsh as someone he trusts, even though Warsh has yet to lower interest rates.
However, Wolfers argued that Warsh is likely going to raise interest rates at upcoming meetings, and that it’s really the only way that inflation can be cut down at this point.
“If they don’t raise rates at the meeting, they might raise it at the one after that, which is also before the midterms,” Wolfers said. “So markets are basically convinced that Kevin Warsh and his colleagues have got no choice but to jack up rates in order to hurt inflation.”
Inflation ticked up in August, with consumer prices up 3.4 percent from a year earlier, CNN noted. The Federal Reserve could raise rates as soon as next week. Wolfers said that markets say “there’s about a 87, 86 percent chance” that the Federal Reserve will raise the rates next week.
However, when the Federal Reserve raises rates, “there’ll be someone in the White House who will be very, very angry,” Wolfers joked.
Wolfers also noted that the “biggest thing driving the cost of living right now is the cost of oil,” but he doesn’t expect the cost of oil to drop until he sees “some progress or figuring out what the heck it is they want to do in Iran,” referring to the Trump administration.
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