The Federal Reserve manages the nation’s money policies, and one of its goals is a 2% annual inflation rate. It’s been a few years since that goal has been hit, and a story on The Washington Post website predicted that the country should expect higher price increases to last a while longer.
“The forces pushing prices higher are multiplying,” the Post wrote. “Tariffs are still grinding through supply chains, the Middle East war is keeping oil markets on edge, and another wrinkle — a boom in artificial-intelligence infrastructure — is driving up the cost of electronic components and electricity.”
Inflation ramped up during President Biden’s term when the government set up one too many relief packages during the covid-19 epidemic. The excessive borrowing dumped too much money into circulation at the same time there were fewer things to buy. This supply-and-demand imbalance ultimately raised inflation to the 9% range before it came back down to 3% to 4% a few months before Biden left office, where it has remained since.
For all his legitimate criticism of Biden’s mismanagement of the economy, Trump is subject to the same allegations. A fervent believer in tariffs on imported goods as a way to keep jobs in the country, Trump in 2025 announced large ones on the world, claiming foreign countries would pay the extra charges instead of businesses passing the price increases along to customers.
The U.S. Supreme Court ultimately said Trump had to get congressional authority to issue those tariffs, but the president has found other methods, and many tariffs remain in place. A recent report by the Federal Reserve Bank of New York predicted many businesses still affected by tariffs plan to raise prices slowly in the future. Which is inflationary, and ultimately customers will be charged higher prices.
Trump’s war of choice in Iran also has the potential to keep raising prices, as we have seen over the past four months. It just depends on the price of oil as the U.S and Iran bicker and fire missiles. It also depends on how much oil and other key products can be sent out of the Middle East without using the Strait of Hormuz.
Finally, the excessive demands of the growing artificial intelligence industry are increasing the prices of computer equipment and, depending on whom you talk to, also raising the price of something we literally can’t live without: electricity.
Add it all up and the Fed’s 2% inflation goal seems unrealistic, at least in the short term. On Wednesday, for example, the Labor Department said the consumer price index had risen 3.5% for the 12 months ending in June. That’s a lower rate than May’s report, but by any math, 3.5 is a long way from 2.0.
It’s worth noting that price increases do matter over time: A 2% inflation rate for a decade will increase prices by 22%. A decade of 3% price increases will raise prices by 34%, and 4% over a decade translates to a 48% increase.
We can’t know the future. Maybe this is an unnecessary exercise and inflation will get back to the desired 2% annual increases. But if current trends hold, we may be in for something closer to the 1970s and early 1980s, when much higher inflation took a full decade to subside.
We do know what went on during the Biden years to fire up inflation, and we also know what’s contributing to the problem right now. Another factor is the government’s $1 trillion a year budget deficit. It has been throwing too much extra money into the economy for the past 25 years, and by any description that is inflationary policy. We all are paying for it
