Trumponomics 101: WSJ schools Trump on inflation and interest rates

The board pointed out that “rising inflation means the Fed must be more cautious in cutting rates,” suggesting that Trump had “the analysis backward.”

The Wall Street Journal’s editorial board has taken a sharp jab at Donald Trump’s economic reasoning, suggesting the US president doesn’t grasp how money works.

Following a rise in US consumer price inflation to 3 percent on February 11, Trump took to Truth Social to demand lower interest rates, claiming they would go “hand in hand with upcoming Tariffs!!!” The WSJ responded with a scathing critique under the headline “Trumponomics and Rising Inflation.”

“Does President Trump understand money? … the answer would appear to be no,” the editorial board wrote, dismantling his argument and cautioning that such a move could fuel inflation and hurt his approval ratings.

“The layers of intellectual confusion here are hard to parse,” they added before attempting to do just that.

The board pointed out that “rising inflation means the Fed must be more cautious in cutting rates,” suggesting that Trump had “the analysis backward.” They further noted that “someone should tell him” that the Federal Reserve’s premature rate cut last September—not current Fed policy—was to blame for the pause in further reductions.

Trump has previously signalled his desire to influence the Fed, telling Bloomberg in July 2024 that he wouldn’t fire Fed Chair Jerome Powell “especially if I thought he was doing the right thing.” The WSJ, however, dismissed the idea, writing, “The Powell Fed is likely to ignore Mr. Trump, and well it should.”

Despite the harsh tone, the Journal made it clear that it wants Trump’s economic policies to succeed, arguing that he isn’t responsible for inflation since he has only been in office for three weeks. However, it warned that failing to curb inflation cost President Joe Biden his reelection and could pose the biggest threat to Trump’s presidency.

“The last thing Mr. Trump should be doing now is demanding that Mr. Powell cut rates further,” the board wrote, adding that “an inflation revival may be the biggest threat to the Trump presidency.”

The editorial also pointed to stagnating wages as a looming risk, noting, “Real average earnings are flat over the last three months.” If this trend continues, the Journal warned, “Mr. Trump won’t have a 53 percent job approval rating for long.”