High Gas Prices, Inflation Likely to Keep Fed From Cutting Rates
The latest inflation report from the Commerce Department showed annual inflation at 3.8% in April, up from 3.5% in March, driven largely by gas prices that are about $1.40 higher than before the war began. This increase is the highest inflation rate in nearly three years and has made the Federal Reserve cautious about cutting interest rates, despite President Trump’s public pressure for such cuts. Fed governor Chris Waller, who had previously been eager to reduce rates due to concerns about a weak job market, has changed his position now that the job market appears to be stabilizing and inflation is a growing concern. The economy also grew at a slower pace than initially estimated, with revised figures showing GDP grew at an annual rate of 1.6% in the first quarter, down from an earlier estimate of 2%. Treasury Secretary Scott Bessent called these “short-term challenges” and noted that unemployment remains low and tax refunds are up about 11% on average from a year ago. Separately, the Washington Post reported that the Treasury Department has been pressing the Bureau of Engraving and Printing to design a new $250 bill featuring President Trump’s likeness for the country’s 250th birthday, a move currently illegal under U.S. law, but Bessent said Congress could change that law. The plan drew criticism from Democrats, including Virginia Senator Mark Warner, who said the White House should focus on lowering costs instead of “stoking the president’s ego.”
What’s reported
Annual inflation was 3.8% in April, up from 3.5% in March, according to the Commerce Department.
Gas prices are up about $1.40 from before the war began.
GDP grew at an annual rate of 1.6% in the first quarter, revised down from an earlier estimate of 2%.
Fed governor Chris Waller changed his mind about cutting interest rates, now citing inflation concerns.
Treasury Secretary Scott Bessent described the economic challenges as short-term, citing low unemployment and high tax refunds (up 11% on average).
The Washington Post reported that the Treasury Department is pressing for a new $250 bill with President Trump’s likeness for the country’s 250th birthday.
Bessent stated that Congress could change the current law prohibiting living persons’ faces on currency.
Senator Mark Warner criticized the $250 bill plan.
Open questions
How long the energy price shock and inflation will persist.
Whether the Federal Reserve will ultimately cut interest rates despite the pressure.
Key figures
Chris Waller – Federal Reserve governor
Scott Bessent – Treasury Secretary
Mark Warner – U.S. Senator from Virginia
Sources: NPR
