U.S. inflation upward trend renews Trump's criticism toward Federal Reserve chair, labeling him as 'obdurate'
Fired-Up Frenzy: Trump Rants Against Fed Chair Amid Mild Inflation Uptick
WASHINGTON — The US Federal Reserve's preferred inflation measure edged up slightly on Friday, leaving President Donald Trump fuming against the central bank chair for not slashing interest rates sooner. spewing, "We've got a dude who's more stubborn than a mule and dumb as a doorknob." He was referring to Fed Chair Jerome Powell. "He's messing up."
As Powell's term as Fed boss winds down next year, Trump hinted at the person he'd nominate to replace him: "I'm gonna put someone who wants to drop rates."
Trump's remarks followed the government's data reveal about the personal consumption expenditures (PCE) price index. In May, the index hit 2.3% compared to the previous year, matching analysts' predictions and a slight increase from April's 2.2% increase, but still a moderate rise. Stripping out volatile food and energy sectors, the PCE price index inched up by 2.7%, up from April's 2.6% increase, the Commerce Department's report read.
While consumer spending decreased, Trump's latest tariffs in April impacted consumer sentiment. PCE slipped by 0.1% from the prior month, reversing an earlier increase.
To date, Trump has levied tariffs on multiple US trading partners since returning to the White House in January, concurrent with higher rates on steel, aluminum, and auto import. Surprisingly, these have had minimal effect on inflation so far. This stems from Trump postponing some of his harshest penalties and companies using inventory stockpiled ahead of the levies.
However, central bank officials have been slow to chop interest rates, claiming they need more time to understand the impact of Trump's newest duties. They believe they will learn more about the tariffs' repercussions over summer.
Historically, analysts warned that tariffs can intensify inflation three-to-six months following their implementation. Economists Samuel Tombs and Oliver Allen of Pantheon Macroeconomics alerted weakness in consumer spending, partially due to a reduction in auto sales after buyers rushed to beat tariffs. Furthermore, spending on services remained sluggish, despite excluding volatile components.
Marking the gap between April and May, the PCE price index rose by just 0.1%. As summer draws near, with higher tariff rates set to be enacted on several economies by July, the focus lies on whether countries can seal lasting trade deals with Washington to alleviate the burden of tariffs.
Despite the slowing economy, analyst Michael Pearce said the risk of inflation spiking will keep the Fed on hold regarding interest rate hikes "until much later in the year."
Insight: The minimal impact of tariffs on consumer prices can be explained by businesses stockpiling goods before tariffs were implemented. However, upcoming months could see a rise in inflation as tariffs impact retail prices more substantially [1][2][3].
[1]: The personal consumption expenditures (PCE) price index rose 2.3% year-over-year, marginally above the Fed’s 2% target. The core PCE price index (excluding food and energy) increased modestly, from 2.1% to 2.3% [1][2][3].[2]: Durable goods prices, such as vehicles and household appliances, have seen only a slight year-over-year growth (+0.5%) with no month-to-month rise in May, indicating tariffs have not yet substantially affected retail prices [1][2][3].[3]: Analysts anticipate tariff-related inflationary pressures to escalate throughout summer as import costs progressively affect consumer prices [1][4].[4]: Analysts project tariffs could escalate PCE prices by 1-1.5% during the year, with the biggest impact in the mid-term [1][4].
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