The Fed Fears Inflation While Ignoring Deflation

U.S. Trade Representative Jamieson Greer (L) and U.S. Secretary of the Treasury Scott Bessent take part in a press conference after two days of closed-door discussions on trade between the United States and China, in Geneva, Switzerland, on May 12, 2025. Jean-Christophe Bott/Keystone via AP

Commentary

Last week, the Federal Open Market Committee (FOMC) met and decided they want to defy: (1) President Trump, (2) Treasury Secretary Bessent, (3) deflationary forces, (4) lower Treasury yields, (5) surging new unemployment claims, and (6) collapsing global interest rates by holding key interest rates steady. That doesn’t include: (7) the cost of servicing a soaring national debt, and (8) a suffering real estate market, so that home builders have to discount homes to sell them. Deflation is spreading, and the Fed can’t see it.