Despite Trump’s Policies, Inflation Will Fall Below Target in 2025: Hanke

• Senior economist Steve Hanke said it was “nonsense” to think Trump’s policies would increase inflation.
• Instead, inflation will depend on the Fed and the money supply, which has been shrinking since 2022.
• He predicted that inflation would fall below the Fed’s 2% target in 2025.

As Donald Trump’s second term approaches, his policy proposals have triggered fears of a resurgence in inflation in coming years, but these fears are unfounded, according to one economist.

One CNBC In an interview on Sunday, Steve Hanke predicted that the decline in inflation will continue next year and fall below the Federal Reserve’s 2% target rate.

“All this talk that Trump’s policies will cause inflation to rise again is complete nonsense,” the top economist said. “It depends on what the Fed does and what the monetary policy picture looks like.” source of money“

According to Hanke, the US money supply has contracted since 2022. Over the past century, the economy’s total money stock has fallen only fourfold, he said. Each Four cases since 1913 This was followed by stagnant price growth as well as recession or depression.

“Meanwhile, the money supply is growing at 2.6% annually, which is below Hanke’s gold growth rate of 6%, which is consistent with reaching the 2% inflation target,” he told CNBC. “So inflation will continue to fall.”

Accordingly Federal Reserve According to the data, the M2 supply measure has started to expand again this year after declining from the peak in March 2022. But the gradual return was not enough to change Hanke’s mind, who remained convinced that a recession would continue. Coming in 2025.

“The fuel of the economy, to put it simply, is the money supply. So what’s going on with the money supply? And if there are significant changes in the money supply, there will be significant changes in nominal GDP,” he previously told NYSE TV Live. this month.

Trump-focused economists have largely ignored this and instead warned that Trump’s promised immigration restrictions, tax cuts and protectionist trade policies will negatively affect this situation. encourage price increase.

However, Hanke rejected these perspectives and praised the new administration’s focus on economic deregulation. In his view, less surveillance would boost GDP growth without inflationary side effects.

He also referenced comments from Scott Bessent, Trump’s pick for Treasury Secretary. Bessent suggested ways to do this to spread any inflationary effects Trump’s trade policies.