【Boss Economics World】INFLATION NIGHTMARE, The Fed's DOING WHAT

welcome back to Boss Economics World the one place where we peel back the ridiculous layers of government blunders bad policies and downright tragic economic decisions that continue to derail the lives of millions today the focus is on a subject that's been frustrating everyone from Wall Street to Main Street inflation is stubbornly here to stay and the Federal Reserve yes one of the all knowing institutions in finance seems content to let it ride for a while is this reasonable or are we about to get another reality check as policymakers stumble their way through a slowly crumbling economy we're at the start of 2025 and what do we have inflation inflation and guess what more inflation despite some earlier progress the US had hoped to finally reign in the beast after aggressive rate hiking cycles in 2023 but as we all know the economy doesn't bend easily to wishes the numbers are clear as day consumer price index CPI data show that inflation especially the so called core inflation excluding energy in food is still rising at an uncomfortable rate January 2025 saw Corps CPI climbed 3.1 percent compared to a year earlier only marginally better than last year's annual figure and certainly not as low as the Federal Reserve had hoped yet Fed Chair Jerome Powell and his colleagues are sitting on their hands after cutting rates by a full percentage point in 2024 they're now convinced that waiting it out might somehow magically fix things Powell's upcoming testimony this week to Congress is likely to emphasize patients citing the resilient job market as proof that things are fine right now but aren't alarm bells ringing while Powell clinks his champagne to the stable economy the data shows that inflationary pressures remain uncomfortably high so what does it mean for us brace yourselves higher prices unaffordable living and policymakers who are digging in their heels leaving us with stagnating purchasing power oh and while we are at it what's the rush on rate cuts right the feds decision to sit tight while the dangers of inflation linger shows just how divorced from reality the central bank's elasticity for turmoil has become the US labor market continues to perplex economists everywhere on one hand it's been defying the odds with significant job gains Payroll's growth for the quarter average 237 000 new jobs per month strong for businesses right strengthening the economy you think but folks let's not get carried away this isn't strength it's a mirage wage growth is tepid at best and nominal salary increases are regularly eroded by inflation meaning many people aren't pulling ahead they're simply treading water if not losing ground in short what looks like a surprisingly resilient labor market is partly smoke and mirrors without real wage growth people can't keep up especially when rent groceries and other essentials keep nudging upwards the inflationary pressures on the economy aren't going away anytime soon especially as job gains that don't directly translate to stronger household purchasing power won't do the trick to restore balance meanwhile add more fuel to the fire President Donald Trump has announced a plan for reciprocal tariffs yes another round of tariffs and this time the entire globe is on tenterhooks trying to figure out what this will mean for trade if history is any guide and it usually is tariffs don't lower prices they raise them boom welcome to more inflation brought to you by good old restrictive protective trade policies in Brazil for example they're already bracing for the next move the South American economy having already been strained by previous Trump decisions is mapping out possible retaliatory strategies if Trump's administration moves ahead with specific actions we're not talking about minor trade spat repercussions here we're talking full scale disruptions as countries line up to defend key industries which of course traps consumers in a price hiking melee Trump's trade war is going to hid inflation where it hurts supply chains and by hid inflation we mean drive it up contributing to the very problem that the Fed is trying but not very hard to manage with its cautious stance on interest rate cuts goods become pricier as global cooperation deteriorates across the world various countries Brazil to Canada Europe to China await Trump's moves with bated breath knowing full well that their economies will feel it in their own consumer prices and industrial production numbers now let's turn our eyes globally from the UK to India to China economies aren't exactly booming in the United Kingdom The Bank of England Boe just have its growth forecast for upcoming periods signaling weaker than expected performance will this curb inflation to not likely the UK is caught in a web of economic stagnation where low growth and persistent inflation could lead to stafflation a situation where prices keep rising even though the economy fails to grow economists are divided on what the latest GDP growth data will reveal but some predict there was a contraction of 0.1 percent in the UK economy last quarter meanwhile across Europe industrial production remains weak and the European Central Bank ECB faces deep uncertainty over whether its current policies will stam inflation effectively over in India now the world's fifth largest economy the Reserve Bank of India just implemented the first rate cut in five years after some of the weakest growth rates since the pandemics worse days and in China consumer price inflation is accelerating after Lunar New Year related spending surges layering more pressure on a sudden fragile economy struggling with persistent deflationary undercurrents what do these stories have in common inflation economic stagnation and global uncertainty the bottom line is that no part of the world's economy is immune from the stubborn variances of inflationary pressure anymore from weak growth in India to steep inflation in Brazil it's a shared struggle but leadership at the top seems to reflect stubbornness rather than solutions the complexities are mounting for central banks who are at a loss relying on outdated strategies and inflationary challenges have spread deeper than anticipated but wait before you think it's only the major economies like the US UK or EU having inflation struggles let's take a field trip down south to Argentina picture a country grappling with inflation historically pushing 289 percent that's a real nightmarish reality and Javier Milii the new president has taken some brutal steps to limit this free falling inflationary spiral but not without consequences you think prices are going up fast in the US imagine a scenario where inflation falls from a whopping 117.8 percent to just 67 percent in about a year sounds like an improvement sure if collapsing prices counts as progress Milei isn't resisting a bit of a victory lap here and neither would you if you had pulled inflation down from catastrophic levels but here's a spoiler high inflation didn't go away it's merely less dramatic right now hyperinflation in Argentina has caused untold damage but it's a cautionary tale for the rest of the world inflation if given free rain can very quickly pull entire economies off a cliff look if you were holding out hope that some magical coordinated effort from central banks around the world would save us think again the bank of Canada South Korea Brazil Chile there are either cutting rates or sitting frozen in fear of holding off reality after all the basic playbook of monetary policy suggests cutting rates stimulates economic activity but too much cutting and you've just added another log to the inflationary bonfire the main takeaway is one we've been harping on from the start a passive or overly cautious approach to inflation is dangerous the resilient global inflation figures from Germany at 0.4 percent to Israel still at 3.8 percent show there's no consensus just yet about what comes next chances are every movement central banks make a rate tweak here a pause there will have major implications in 2025's already fragile global economy so what are we left with a mess worldwide inflation a widening income gap worsened by an increasingly unaffordable cost of living and confusing central bank signals that leave regular folks spinning in economic uncertainty the world in 2025 is facing economic headwinds that have their roots in inflation mismanagement protectionist policies like tariffs and trade wars and disjointed strategies from global monetary policymakers it's time for leadership to step up and admit the mess we're in but more importantly it's time for real bold and innovative approaches to break free from repetitive economic cycles that make life finer for the top 1 percent and harder for the common household is anyone in power stepping up to take responsibility not quite yet but tune into Boss Economics World next week and will dissect more of this chaos for you maybe just maybe someone in power will figure this out your seat at the hot economic debate table awaits until next time my friends remember the solution to inflation isn't empty promises it's real action