The David Lin Report

Will Fed Cut Rates By 3%? Is Massive Inflation Returning? Economist Steve Hanke Answers

Jul 18, 2025
Steve Hanke, a Professor of Applied Economics at Johns Hopkins University, critiques both Trump and the Federal Reserve for their misguided focus on interest rates instead of the money supply. He argues that tariffs lead to only temporary price fluctuations while the money supply governs long-term inflation. Hanke sheds light on the dangers of current monetary policies and their role in exacerbating income inequality. He emphasizes the need to reevaluate financial systems to stabilize inflation and promote economic equity.
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INSIGHT

Inflation Tied to Money Supply

  • Inflation closely follows changes in money supply, not interest rates, according to Steve Hanke.
  • Both Trump and Powell misunderstand monetary policy by focusing on interest rates instead of money supply.
INSIGHT

Tariffs vs. Monetary Policy Effects

  • Tariffs cause only temporary price blips while long-term inflation is driven by monetary policy.
  • Producer Price Index (PPI) is steadier and better reflects effects on tradable goods affected by tariffs than Consumer Price Index (CPI).
INSIGHT

PPI Better Reflects Tradables Inflation

  • The PPI is a better indicator than CPI for tracking tradables influenced by tariffs and exchange rates.
  • Non-tradables like housing are unaffected by tariffs and trade fluctuations, impacting inflation differently.
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