Trump inherits rising inflation as he takes office

Inflation's New Year's Resolution: Keep Climbing Consumer prices didn’t take a holiday in December. The annual inflation rate bumped up to 2.9% from 2.7% in November. That’s like that New Year’s resolution to be more “fit” — steady, relentless, and a bit too much. A 0.4% monthly rise was above expectations and confirmed that inflation’s staying power isn't going anywhere anytime soon. Despite this, the "core" inflation reading—minus volatile food and gas prices—rose less than feared. While that’s a win for the wallets, it doesn’t exactly spell the end of the inflation headache. Investors, though, found solace in the shelter sector, which grew at its slowest pace since January 2022, fueling optimism that things might cool off. A little economic uncertainty never scared Wall Street—right? Stock futures soared post-report, with the Dow jumping nearly 700 points. But the market’s enthusiasm might be premature. Analysts warn that volatility ahead could make for a bumpy ride, especially with Trump inheriting a tricky economy. Remember 2016-2017? It was a different story back then. Even if investors are popping champagne now, they might need some dramamine for what’s to come. As inflation continues to rise, Trump’s economic team will be tasked with managing a wobbly economy while navigating price increases, tariffs, and unpredictable policy moves. Trump’s second go-round at the White House is already met with cautious optimism from stock market bulls. His re-election promises to keep the economy rolling, riding high on Biden-era GDP growth. But as inflation marches on, his economic playbook might need some serious edits. Rising costs could throw a wrench into plans for lower taxes, fewer regulations, and more growth. Investors aren’t as cheery as they were in 2016, and economic conditions are tougher now. High interest rates, soaring debt, and the constant threat of tariffs complicate his “America First” agenda. Markets already punished stocks and bonds in anticipation of these factors, and Trump has no choice but to keep navigating this turbulent economic sea. Enter tariffs—Trump’s signature weapon in his trade wars. Some analysts are already nervous about their inflationary potential. If consumers rush to buy before the price hikes hit, inflation could surge. Meanwhile, a hot job market and strong GDP growth are fueling concerns that higher prices may be more than just a passing problem. The threat of tariffs has added pressure to an already tense economy. Investors are keeping an eye on how the Trump administration plans to handle the balance of fostering growth while fighting inflation. If tariffs push prices higher, Trump’s economic agenda could face some tough headwinds. It’s a tricky game of inflationary chess. Not all economic news is doom and gloom. While the broader economy faces uncertainty, some sectors are showing resilience. Jobs continue to be created, albeit with a few slow spots—white-collar jobs have barely budged in 18 months, and manufacturing has flatlined. But hey, a few bright spots are better than none, right? The December jobs report revealed a significant 256,000 positions added, smashing expectations. But, with inflation climbing, will those job gains translate into sustainable economic progress? Or will higher wages and borrowing costs weigh down consumers? Trump may need to tweak his approach—if he wants to keep job growth in the fast lane. Goldman Sachs isn’t too worried about Trump’s policies making inflation run wild. They argue that fiscal changes and tariffs won’t create the type of inflation spike that would trigger an immediate Federal Reserve response. However, that doesn’t mean the road ahead is clear of potholes. With a cautionary tone, many economists wonder if Trump’s approach will lead to “disinflation,” or a gradual slowing of price increases. But "gradual" might not be fast enough for those feeling the pinch at the grocery store or filling up their tanks. So while the Fed might not hike rates aggressively, Trump’s ability to juggle the economy’s twists and turns will be critical.