In a moment of jaw-dropping candour on live television, the President declared, “I love the inflation.” As if the bond markets weren’t already sweating. US consumer prices have surged at their fastest clip in three years, and the man in the Oval Office is cheering from the sidelines.
For those of us who spent decades watching the Bank of England’s every twitch, this is not just economic heresy. It is a recipe for capital flight, higher gilt yields, and a sterling under siege. The fiscal discipline that markets crave is being trampled by populist rhetoric.
Inflation may be a tax on the poor, but it is a death sentence for bondholders. If City traders are not already rebalancing their portfolios away from dollar-denominated assets, they should be. The only thing worse than high inflation is a leader who embraces it.
The market’s invisible hand is now slapping the face of fiscal responsibility. Expect volatility, and not the fun kind.
