Catherine Rampell

And then eventually you hope to get to this equilibrium where prices are lower and interest rates are lower.

But you kind of need the inflation thing to go down first before you can bring down interest rates.

And what Donald Trump has done instead is he's reaccelerated inflation.

He did it with tariffs.

And now he's doing it with the war.

And the real question for the Fed is, well, is it like a one-time increase in prices?

That was the hope with tariffs, that it would be a one-time increase.

It's not like an ongoing increase in prices that you really have to worry about, you know, inflation kind of spiraling out of control.

Same deal with a massive oil shock.

Is it a one-time increase in oil prices?

And what happens is there's this fear that there's like this one-two punch of those things together that will reset people's expectations so that they start to expect ever higher prices.

Even if the oil shock was kind of a one-time thing, people start worrying about prices going up.

So they preemptively raise their own prices.

Right.

which becomes self-perpetuating because nobody wants to get caught off guard being the only, you know, chump out there essentially who isn't raising their prices when everybody else is.

I was thinking of more vulgar words for that, but yes.

Anyway, so that's the real problem here, that Trump himself has re-accelerated inflation, and now the Fed doesn't know what to do about it.

When we started this year, markets kind of thought that the Fed was going to cut rates a couple more times.

As you mentioned, they had cut rates last year.

It looked like they were going to cut rates a couple more times.