GOOD NEWS ON INFLATION. Biden-era inflation, what many call the “affordability crisis,” was the No. 1 reason Donald Trump was elected president for a second time. Yes, voters wanted Trump to fix the Biden disaster at the U.S.-Mexico border. And yes, they were concerned about crime, woke, and chaos in global affairs. But inflation was the No. 1 voter concern.
Now, there is a bit of good news on the inflation front. The Bureau of Labor Statistics reports that the consumer price index rose 0.2% in February, for an annual basis of 2.8% — down from 3% on an annual basis in January.
That annual number, 2.8%, was a little lower than economists’ predictions, leading to a number of “better than expected” headlines. “U.S. Inflation Eased More Than Expected in February,” the New York Times reported. “Inflation eased more than expected in February,” the Washington Post reported. “The declines were greater than economists expected,” the Associated Press reported.
The better-than-expected aspect of the story is quite important because there was worry after the January report that if the rate of inflation continued to rise in February, then it would be a sign that inflation is stubbornly refusing to go away and might require more stringent measures to bring it down. Now, that worrisome possibility seems a little less likely.
The hope is that February’s results will signal a new positive trend — and put an end to an old negative one. Inflation, which hit 9.1% on an annual basis in June 2022, gradually fell all the way to 2.4% last September. But then it started to rise again — 2.6% in October, 2.7% in November, 2.9% in December, and 3% in January. Now — cross your fingers — with the decline to 2.8%, the hope is that what appeared to be a second coming of inflation during the Biden years has stopped.
Of course, that is not the whole story. If you read any of the dozens of articles on the February numbers, you saw a warning that Trump’s tariffs could reignite inflation and maybe even plunge the economy into recession. Going fully negative, the Washington Post headline was, in full: “Inflation eased in February, but trade war threatens higher prices; Tariffs have fueled worries of another recession, which President Donald Trump has declined to rule out.” Other accounts said much the same thing.
Certainly, the stock market has reacted badly. The market had a good day on Wednesday, but before that, the S&P 500 was down 9.3% from its high last month, while the Nasdaq was down 14% from its high in December.
There’s no doubt Trump’s on-again, off-again tariff threats and negotiations have a lot of people on edge. Not the fact that he will impose tariffs — Trump talked extensively about tariffs during the campaign, and no one can be surprised that he is imposing them. But if he just announced the tariffs and moved on, then everyone would be busy adjusting to the new reality. Instead, Trump has announced tariffs, postponed them, announced them again, made exceptions to them, and more. Everyone is talking about “uncertainty” because everyone is, in fact, uncertain about what will come next. And that makes business nervous.
So, we know that Trump has been all over the place on implementing tariffs, but we don’t know where the tariffs will end up. Certainly, Trump imposed tariffs in his first administration, and the economy ended up in a good place, at least before COVID hit. So, it’s impossible to say now that Trump will fuel inflation or that he will bring on a recession, for the simple fact that we don’t know what he will do.
But we do know that inflation got better in February. Be glad about that.