Inflation Persists Under Trump; Musk Proposes $1 Trillion in Cuts

WASHINGTON (AP) -- As a candidate last year, Donald Trump suggested he could easily conquer inflation and ease voters' fears about the economy. "I will very quickly deflate," he promised at a California rally. "We are going to take inflation, and we are going to deflate it. We are going to deflate inflation. We are going to defeat inflation. We're going to knock the hell out of inflation." Wednesday's consumer price index report showed that inflation is punching back -- and President Trump could end up facing the same challenges that dragged down his predecessor, President Joe Biden. The annual inflation rate has risen in the three months since the November election to 3%, with gasoline prices climbing despite Trump's claims that his return to the White House would signal increased oil production that would lower energy costs. Consumer sentiment measures suggest the public already sees Trump's plans to expand tariffs as increasing inflation. On Wednesday, the president called for interest rate cuts, even though rate hikes by the Federal Reserve helped lower inflation that spiked at a four-decade high in 2022. The latest consumer price figures have unnerved economists and the financial markets because they suggest that strong consumer spending, solid job gains and a falling unemployment rate could reignite inflation. The cost of goods rose last month even before the imposition of tariffs. Trump has placed 10% tariffs on China, in addition to announcing the removal of exemptions on his 2018 steel and aluminum tariffs. Joseph Brusuelas, chief economist at RSM, stated that baseline inflationary pressures could be at their highest level in decades. Trump's call for lower rates puts him in opposition to Fed Chairman Jerome Powell. Powell told a congressional committee on Wednesday that the Fed would use interest rates to bring inflation back down to 2% over time and that Trump's calls to lower rates wouldn't sway the Fed. White House press secretary Karoline Leavitt said at Wednesday's news briefing, "The Biden administration indeed left us with a mess to deal with." On Tuesday, Elon Musk, the head of the president's Department of Government Efficiency, proposed $1 trillion in spending cuts this year. Musk wants to eliminate $1 out of every $7 spent by the federal government in order to bring the inflation rate to zero. Musk said, "If you cut the budget deficit by a trillion between now and next year, there is no inflation." The yield on the 10-year Treasury note jumped Wednesday to 4.62% in response to the inflation report. According to the University of Michigan's consumer sentiment survey, Americans' expectations of inflation over the next year have soared. The February survey said that inflation this year will be 4.3%, up sharply from 3.3% the previous month.