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(Graphic from FRED, Federal Reserve Economic Data)
The Myth Busting Economist by Larry Malone

Inflation Likely To Rise as New Policies are Enacted

An earlier column this year asked “Where Did All of the Inflation Come From?” A big myth was busted when we discovered that the origins of recent inflation dated to Trump’s Tax Cut and Jobs Act, which injected $2.3 trillion into an economy with a 4 percent unemployment rate in 2019.

Putting a record breaking corporate tax cut into a thriving economy increased the inflation rate from 1.9 percent in 2018 to 2.3 percent in 2019. With inflation above the Federal Reserve’s 2.0 percent target, the Fed responded by raising its Federal Funds rate FOUR times in 2019. Higher interest rates made the cost of borrowing for homes, boats, snow machines and college rise even more.

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