Several weeks ago, I stated on this blog that Trump’s biggest challenge is to keep inflation under control.  This is an even bigger challenge today.  Consider:

• As of January 2025, inflation (the consumer price index, CPI) is back up to 3%, way above the Fed’s desired level of 2%. This means that the Fed will not be cutting interest rates any time soon and may even have to raise them again.

  

• If such a high inflation rate continues, and maybe even goes higher, Trump won’t keep his current 53% job approval rating for long.  Furthermore, his tariff plans could push inflation higher than it is already.
• A recent Government Accountability Office (GAO) report states that the Federal Government loses between $233 billion and $521 billion annually to fraud. This is what Elon Musk and his DOGE team are trying to eliminate.

  

• House Republicans last week advanced a blueprint that directs committees to find $2 trillion in savings to offset planned $4.5 trillion in tax cuts or new spending. This obligates House Republicans to shrink bloated programs like Medicaid and food stamps so that they can spend more on defense and the border.

  

Conclusion.  The Fed cannot control inflation by itself, just by raising interest rates.  It needs fiscal restraint from Congress and the President as well.  Congress is doing its part by setting a $2 trillion (ten-year) goal for cutting spending.  The President is doing his part by recruiting Elon Musk and DOGE to eliminate waste, fraud, and inefficiency in government spending.  In other words, the Republicans now in charge of the Federal Government are off to a good start in doing what is necessary to help the Fed bring inflation down to the desired 2% level.  This is critical for the success of President Trump’s second term.

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