Contrary to growing concerns about potential inflationary pressures under President-elect Donald Trump‘s administration, top economist Steve Hanke dismisses fears of a significant price surge, citing monetary policy and money supply as critical factors.
What Happened: In a recent interview with CNBC, Hanke argued that the inflation trajectory depends more on Federal Reserve actions than proposed economic policies. “All this talk about Trump’s policies causing inflation to kick up again is just nonsense,” Hanke stated.
Hanke highlighted a critical economic indicator: the U.S. money supply, which has contracted since 2022. Historically, such contractions have preceded economic downturns. “The money supply is growing at 2.6% year-over-year, below my golden growth rate of 6%,” he explained.
The economist predicts inflation will fall below the Fed’s 2% target in 2025, challenging warnings from economists like former Treasury Secretary Larry Summers, who anticipates potential inflationary risks from proposed tax cuts and trade policies.
Why It Matters: Hanke praised the potential administration’s focus on economic deregulation, suggesting it could enhance GDP growth without triggering significant inflation. He referenced Scott Bessent, Trump’s potential Treasury Secretary pick, who has proposed strategies to mitigate potential inflationary impacts.
Market indicators currently show resilience. S&P 500 tracked by the SPDR S&P 500 ETF Trust SPY has gained 3.61% since Nov. 5, trading at $597.53 on Monday, while Nasdaq-100 Index tracked by Invesco QQQ Trust, Series 1 QQQ increased 2.92% during the same period to $506.59, data from Benzinga Pro.
The potential economic shifts come amid a complex fiscal landscape, with the U.S. federal budget deficit projected to reach $1.7 trillion in 2024 and the debt-to-GDP ratio approaching 120%.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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