Trump's Strategy to Combat Inflation Unveiled

In his latest address, President-elect Donald Trump pledged to lower inflation and promised, "Make America affordable again." Many Trump voters, nearly half, cited rising prices as pivotal in their elections. However, economists warn that a president's power over inflation is limited, as seen by Donald Kohn, an economist with experience in the Federal Reserve. According to Kohn, inflation results from a delicate balance between the demand from buyers and the supply of goods in the economy. With growing demand and little supply, inflation tends to rise. This is also affected by factors like interest rates and geopolitical events, such as Russia's actions in Ukraine, which have already affected energy prices. While the Federal Reserve plays a central role in managing inflation through interest rate adjustments, presidential policy can still have an impact. Taxation, trade policies, and federal spending are cited as three critical areas where the president can take action. Increased federal spending can uplift demand leading to potential inflation rises, while higher taxes can help mitigate this effect. Trump’s administration is expected to pursue tax cuts that echo the policies of his previous term. Notably, Trump has also proposed creating the Department of Government Efficiency, potentially led by figures like Elon Musk. Yet, experts express concern that these measures might ultimately contribute to a budget deficit and could counteract inflation-reduction efforts. As the economy finds its footing, the question remains: who will ultimately wield the greatest influence over inflation—the Trump administration or the Federal Reserve?