Last week, Treasury Secretary Scott Bessent, articulated that focusing on anchoring inflation and therefore the longer-term interest rate is a much better focus than the President’s criticism of the Federal Reserve. Time will tell if he will be successful that way. This week, Chairman Powell will testify in front of Congress, and I will be watching social media to see if the President makes a comment. It will be very important in terms of setting inflation expectations for investors. Last week, we saw a massive jump in 1-year inflation expectations in the Michigan survey. No doubt, they have tariffs on their mind.
Trump’s America First agenda hopes to boost growth and jobs while cutting taxes. These are inflationary policies to be sure with mandatory fiscal spending out of control. DOGE (department of government efficiency) Czar, Elon Musk, X-ed (formerly tweeted) the 2019 vs. 2024 comparison. NOTE that the biggest line-item increase is interest cost. Interest expense is rising rapidly. The ONLY way to curtail it is to keep the cost of funding as low as possible, limit the growth of the debt burden, and reign in inflation expectations.
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