01-28-2025
In his first week back in office, Donald Trump proposed measures he says will combat inflation — immigration crackdowns, new tariffs, energy policy changes, regulatory rollbacks, undoing Biden-era drug pricing efforts. Experts from the Daniels School of Business offer perspectives how effective these measures will be.
Daniels School Distinguished Fellow Doug Holtz-Eakins offered insights for The Washington Post article “Trump wants to tackle inflation. Will these top actions bring prices down?” The article examines President Donald Trump's first week in office actions aimed at tackling inflation.
The piece analyzes the measures proposed by Trump and calls for lower interest rates. Holtz-Eakins and other experts weighed in on the potential impact of each measure on inflation, with mixed predictions.
While some actions like expanding oil and gas drilling and rolling back regulations might help reduce costs, others such as immigration crackdowns and new tariffs could potentially increase inflation. The article provides a balanced view of the complex economic implications of Trump's proposed policies.
Holtz-Eakin emphasized that embedded inflation takes a long time to resolve, stating, "The reality is, inflation of the type we have gets embedded into the economy and takes a long time to wring out. There aren't many quick solutions."
Regarding gas prices, Holtz-Eakin suggested that while Trump's energy policies might lower costs, the impact may be limited: "Maybe gas and oil will get a little cheaper, and that's something people would notice. But we've already seen global gas prices come down in a big way in the last year, and I don't know that they can get a whole lot lower."
On the topic of rolling back regulations, Holtz-Eakin was more optimistic: "The track record for the first Trump administration on regulatory costs was spectacular, and if they do that again that would take a lot of costs out of the equation. That's qualitatively the biggest thing they could do to lower costs."
Holtz-Eakin's comments suggest a cautious outlook on the immediate impact of Trump's policies on inflation, while acknowledging potential benefits in specific areas like regulatory rollbacks and energy costs. Read the full piece.
Jim Bullard, Samuel R. Allen Dean of the Mitch Daniels School of Business, told Agence France-Presse (AFP) that that the Federal Reserve is in a good position and should maintain its current stance. He supports the expected pause in rate cuts, stating, "I think they will do nothing, and I think they should do nothing.”
While many economists worry about the inflationary effects of Trump's proposed policies, Bullard disagrees. He argues that the concern about tariffs causing inflation is exaggerated, saying, "I think the story that tariffs are inflationary is overplayed in financial markets."
Bullard suggests that the focus should be on economic growth effects rather than inflation. He states, "The (economic) growth effects are actually the ones to worry about, and most of those are coming through the uncertainty channel and not through the actual effects of actual tariffs."
Bullard anticipates that the Trump administration will be more business-friendly. He expects potential deregulation efforts, which he believes could have the most significant impact on the economy.
Bullard draws parallels to the previous Trump administration, suggesting that current concerns might be overblown based on past experience. He notes, "We have seen this movie before: We had the first Trump administration.”
Overall, Bullard's insights provide a more optimistic and nuanced view of the economic situation, contrasting with some of the prevailing concerns about inflation and the potential negative impacts of Trump's proposed policies. Read the full piece.