In a moment that will surely be replayed in central bank vaults for decades, Donald Trump has declared his affection for the very economic plague that is eroding the purchasing power of every household in America. “I love the inflation,” he proclaimed, as the Consumer Price Index delivered its hottest print in three years. One can only assume the former president is a fan of gilt yields too, because that is where this affair ultimately leads.
Let us be clear: inflation is not a policy choice. It is a tax on the working man, a stealthy revaluation of assets that punishes savers and rewards speculators. For a man who once boasted about the stock market, this newfound romance with rising prices is a curious about-face. Perhaps he has finally realised that nominal GDP growth can be juiced by printing money, but the real economy pays the price in capital flight and currency debasement.
The numbers are stark. The annualised rate of CPI inflation has accelerated to levels not seen since the post-pandemic supply shock. Core inflation, stripped of food and energy, is sticky as treacle. And what does the President-elect offer? A rhetorical embrace of the very forces that will force the Federal Reserve into a tightening cycle. The bond market, that stern disciplinarian of fiscal profligacy, will not be so forgiving. Already, the yield curve is steepening, a classic signal that investors demand a premium for holding long-term debt in an inflationary environment.
This is not the first time we have seen a politician flirt with inflation. In the 1970s, Arthur Burns capitulated to White House pressure, and we all know how that ended. The difference is that Trump is not just tolerating inflation; he is celebrating it. It is a dangerous game to play with the confidence of international capital markets. If the dollar weakens, foreign investors will flee Treasuries, and the cost of borrowing for the US government will soar. That is the bottom line.
One must ask: is this a calculated strategy to erode the real value of the national debt? Or is it simply economic illiteracy dressed up as populism? Either way, the markets will have the final say. The Bank of England, the ECB, and every other central bank watching this spectacle will be reminded of the importance of independence. For now, the Federal Reserve must hold the line. If not, we will all be paying the price in higher mortgage rates and a weaker standard of living.
Inflation is a thief. And the man who loves it is picking the pockets of the American people.
