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In 2025, tensions may arise between President Trump and Federal Reserve Chair Jerome Powell over interest rates, particularly if inflation rises due to Trump's expansionary fiscal policies. While Trump may push for lower rates, the Fed's traditional approach could lead to conflicts, especially as Powell's term ends in 2026. Economic impacts from Trump's policies may take time to manifest, potentially delaying any Fed response.
Deflation has emerged in various sectors, with prices for physical goods like appliances, clothing, and new cars declining since October 2023. The consumer price index indicates a 1% drop in core goods, driven by normalized supply chains and a strong U.S. dollar. Energy prices, including gasoline, have also significantly decreased, contributing to lower costs in other areas, while food prices are influenced by unique supply-demand dynamics.
Trump's proposed universal tariffs could lead to significant price increases on a range of consumer goods, with clothing prices expected to rise by 12.5% to 20.6% and toys by 36.3% to 55.8%. This would result in a $46 billion decrease in purchasing power, disproportionately affecting low-income households. Critics argue that these tariffs would act as a tax on American families without creating new jobs in the affected industries.
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