Why did some Americans think Donald Trump could crack inflation?

Americans were promised the impossible during Trump’s presidential campaign and now egg-flation is home to roost. I refer of course to his campaign around the price of eggs, which captured American minds as a staple good that soared in price during Biden’s tenure and was presented by Trump as Biden's affront to the affordability of everyday life.

This article playfully references egg-flation as the symbolic central theme of Trump's campaign against inflation. It does not purport to literally connect eggs to inflation, which ironically at the time of Trump's campaign were in part driven by an avian flu outbreak.

Donald Trump’s America is a strange creature, as unrelentingly dichotomous as the man himself. He has just announced “200 Days of Winning: President Trump is Keeping his Promises”, and yet America remains buckled by stagnating growth and abject unaffordability. His dichotomy is fast approaching delusion.

There is some method. It causes my pause for thought on how to define him. Trump’s frankness has led to some favourable outcomes across elements of his non-tariff geopolitics. However, his commitment to openness appears performative when he is presented with negative data around the economic condition of the US and he attacks the source and not the cause, shooting messenger institutions like the Fed and BLS. Institutions whose purpose is to preserve the fiscal integrity of the country. Trump was reined in only by the responding soaring Treasury yields – the market chastising Trump’s egoism with a frank threat to the affordability of national debt.

Often a campaign overpromises, but powerful emotions surround this issue for Americans. This heat appears to be pushing Trump to vocalise rash views around the Federal Reserve and Bureau of Labor Statistics to point the finger of blame when, in fact, inflation is a natural albeit protracted consequence of the last few years.

So, why was it inevitable that Trump would struggle to crack egg-flation?

Factors impacting inflation are many. There is an inordinate amount of economic push and pull driving goods and services prices in 2025: market-driven (energy, oil, supply, employment and we will include the Fed here); government-driven (tax, welfare and voter sentiment); a combination of the two (wages); and force majeure like disease and conflict.

Trump has exercised control over taxes in his tariff strategy. So far, disastrous for inflation. A recent piece by the Bloomberg editorial board explains how tariffs typically result in domestic producers increasing the price of their goods because they are bolstered by the lessening competition. Much like in the UK, tax-based government decision making has exacerbated inflation, contracted growth, and left the populous disillusioned. The underlying government actions are different, but the general feeling of poorness and unrest is shared.

Ultimately, there is no and never was a quick fix for the issues facing the US, which are much the same as those facing most economies in the post-pandemic world. Growth in productivity will help the US the most by flattening the national debt to GDP ratio, much like the UK. This takes time.

Why does the Fed have to ignore the temptation to stimulate the economy by cutting rates?

I should highlight that the issue with Trump is not that Jerome Powell is sacred, the sacrality is rather the independence of the Federal Reserve. If Trump fired Powell and exerted government power over the Fed, there would almost definitely be an immediate acutely negative market reaction.

It is indeed not so easy to stimulate the economy in the current inflationary environment – where there is not just inflation proper but the expectation of it – with rate cuts. More than likely with a premature rate cut or just the Fed appearing to lose its independence through pressure from Trump, inflation will be expected and, contrasting the very purpose of cuts, the longer-term rates that set the cost of debt in the US will increase (Treasury yields, corporate bond yields, the prime rate, and SOFR).

Instead, the Fed is likely to respond to lower inflation and weakening labour with rate cuts, not try to induce it. As the US job market is weakening per the July data, even with some surprise worsening inflation data, it is expected that the Fed will cut rates at the next review. The Fed’s job at the present moment is to balance employment data with the upside risk of inflation, while also accounting for the higher risk premium that may be attached to longer term maturities with the volatility of Trump’s administration (the chastising I mention above). The irony is that Trump’s pressure on the Fed, either via indirect aggressive tax policy or overt direct aggression, is protracting their decision making.

His behaviour is so illogical that it begs the question. Trump is either hiding behind the inflationary implications of his own policies by scapegoating the Fed, or he genuinely doesn’t understand that the Fed is an independent body that uses time and thought to stabilise the US economy. More importantly, that is how the Fed is and must be perceived.

Given Trump has now shifted his target to the Bureau of Labour Statistics, it would appear that anyone whose output disagrees with him is the enemy; the US now finds itself in a position where Trump’s enemy is factual accuracy itself. We all want inflation to come down, but the economy isn't a business partner that can be made to submit. Trump’s concerns around his image and party promise is undoing the Fed’s hard work of stabilisation.

Will Trump face up to the reality of his decision making, his America, and stop forcing interference with policymaking, or is he too chicken?

This blog could not have been written without the Financial Times and Bloomberg Opinion. I recommend you subscribe to these services to build your own view, and treat my blog as an informed conversation with a friend. All opinions are my own.