Inflation remains a vital economic concern for Americans because it affects the price of everyday items — from groceries to gas. Americans are now looking to the White House for answers as the consumer price index rose to 3% in January, compared to 2.4% last September, when it hit a three-year low.
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“In our country, the sitting president can have a huge influence on inflation and the effects of it,” said Steve Azoury, CEO of Azoury Financial. “Inflation can turn $1 into 50 cents, and for a society to run, it must be under control.”
Is inflation avoidable? How much power does the president really have?
How Presidents Shape Inflation
President Donald Trump successfully campaigned on the promise to end inflation.
His first few months back in office have been consumed by a flurry of economic policies, such as increasing tariffs, deregulation, cutting government programs and reducing foreign aid.
“Presidents influence inflation through their spending decisions,” said Wayne Winegarden, an economist at Pacific Research Institute. “Running large deficits will create pressure on the Federal Reserve that ultimately causes inflation to rise.”
Winegarden explained, “Similarly, implementing a fiscally responsible budget with a more efficient tax system will reduce the deficits and free up the Federal Reserve to implement sounder monetary policy.”
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What Really Drives Prices
While presidential policies dominate headlines, inflation is primarily influenced by broader economic forces.
“The connection between government spending, economic growth and monetary policy drives inflation,” Winegarden said. “But because of its complexity, it is not well understood.”
Energy costs are one of the biggest drivers of inflation.
“The cost of energy needs to get under control,” said Joe Camberato, CEO at National Business Capital, an online resource that helps business owners find and secure financing.
Camberato explained, “Think about every single thing you use in your daily life — it uses energy. Your house, all forms of transportation and every item you buy was shipped to you. We need energy prices to come down, and innovation in energy to happen faster.”
Regulations also play a significant role. Trump has pushed for deregulation, signing an executive order requiring the elimination of ten existing rules for every new one added.
“Restrictions on companies can have a big impact on what companies can or cannot do,” Azoury said. “Productivity of workers and supply chain issues can impact inflation, as well. High productivity can help increase output and wages. Supply chain issues can help promote supply and demand.”
A president can shape inflation by influencing policies on energy, regulations and economic growth — but they don’t control it entirely.
Lessons from Past Leaders
Historically, presidential policies have had mixed results in controlling inflation.
The 1970s saw severe inflation due to a combination of weak Federal Reserve policy and excessive government spending by Presidents Johnson, Nixon, Ford and Carter. However, inflation during the 1980s was kept relatively under control due to more disciplined monetary policy, despite occasional economic crises.
Camberato said Trump’s trade policies during his first term helped him keep inflation low.
“Trump did a solid job during his last term by using tariffs strategically and getting companies to bring manufacturing back to the U.S.,” Camberato said. “That move helped stabilize prices and keep inflation low. It showed how smart trade policies and a focus on domestic production can make a big difference.”
Trump’s Latest Moves
The president also influences inflation through energy policies, changes in regulations and adjustments to taxes, as well as by creating manufacturing incentives for producing things like food or energy.
“All of that affects prices,” Camberato said. “Plus, a president can either boost [consumer] confidence or destroy it, which plays a big role in how markets react. And when markets move, inflation follows.”
For example, Trump’s latest moves, including doubling tariffs on Canadian steel and aluminum to 50%, have escalated tensions with the U.S.’s neighbors.
While the administration has said that the tariffs protect domestic industries, some businesses, according to Reuters, warned of “consumer reluctance” and “weaker-than-expected profits.”
Executives from companies like Delta Air Lines and Kohl’s warned that the economic changes are hurting their businesses. Reuters reported that Delta CEO Ed Bastian “noted several sectors were showing softness, including autos, technology, media and aerospace and defense.”
Ultimately, while presidents can shape inflation through economic policies, they don’t have absolute control. Inflation remains a complex issue driven by politics, policy and long-term economic trends. Understanding these nuances helps individuals make informed financial decisions instead of placing all of the credit and blame on the White House.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Is Inflation Avoidable? How Much Power the President Really Has
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