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Inflation hurts consumers. So naturally, the Fed is paying more attention to these numbers. And that’s why the central bank just raised interest rates yet again.
But the problem is inflation has moved far above the Fed’s target. An important factor? President Trump’s trade war with China.
“The trade war is about 25% of what’s making inflation move up,” said Heather Scoffield, a CNN foreign affairs analyst and author of “Crashing the Dollar.”
“That’s not nothing. And that is obviously something we’ve got to take into account.”
Scoffield says the trade war has partly cut into American exports. But what about inflationary pressures in China, which has imposed retaliatory tariffs on some American products?
There are a couple of things that can be done. One is regulatory reform, at least to lower costs for firms. That can help the market function better and remove some of the uncertainty of changing tax laws.
The other thing the Fed can do is raise rates. In fact, it has raised rates several times this year. But it can be successful at that if it focuses on pricing.