The Federal Reserve is growing increasingly concerned that President-elect Donald Trump’s ambitious economic policies could lead to a resurgence in inflation by 2025. As the US economy continues to recover from the COVID-19 pandemic, policymakers are closely monitoring the impact of potential fiscal stimulus packages and tax cuts.
According to Fed officials, if implemented aggressively, these measures could drive up demand for goods and services, potentially fueling price increases across various sectors. This risk is particularly relevant in light of the current economic environment, where wages have not kept pace with inflation, leaving consumers with reduced purchasing power.
While some argue that Trump’s policies will boost growth and create jobs, others caution that the resulting inflation could erode consumer confidence and undermine the Fed’s ability to keep prices under control. The Fed is likely to maintain a hawkish stance in its monetary policy framework, prioritizing price stability over economic growth in order to mitigate this risk.
As the debate around Trump’s 2025 policies continues, one thing is clear: the Federal Reserve will be keeping a close eye on inflationary pressures and adjusting its monetary policy framework accordingly.
Source: https://www.washingtonpost.com/business/2024/12/21/fed-starts-to-think-about-trump