Trump's Potential Impact on Federal Reserve's Inflation Battle

The Federal Reserve's ongoing challenge to control inflation may face new obstacles if Donald Trump returns to the presidency. His proposed economic policies, including higher tariffs and mass deportations, are expected to increase inflation, pushing the Fed to adopt stricter monetary measures.

The Federal Reserve's efforts to control inflation could face fresh hurdles if Donald Trump regains the White House, a dynamic likely to place the U.S. central bank back in the crosshairs of the former president.

Economists widely predict that Trump's tariff agenda and aims to deport millions of undocumented workers would reignite price pressures. Forecasters suggest that a 10% tariff on imported goods, coupled with higher wages due to deportations, would force the Fed to implement more restrictive monetary policies.

An Oxford Economics model shows that under a second Trump administration, core inflation could peak at 0.3 to 0.6 percentage points higher than under current policies. This contrasts with the potential 0.1 to 0.2 percentage point rise under a Democratic administration led by Kamala Harris, who is expected to continue Biden's economic strategies.

(With inputs from agencies.)