A new analysis by economist Bob Elliott warns that a “sharp increase in rate-related price increases” will keep inflation “stuck above 3%,” effectively wiping out any disinflationary relief consumers received from falling rents.
Tariffs fuel ‘price rises’ while putting pressure on household spending
In a substack remarkthe CEO of Unlimited Funds argued that this dynamic is “creating a squeeze on household spending” as prices for goods rise.
However, the analysis, which describes how tariff costs work ‘through supply chains’, drew a sharp rebuttal from the Chancellor of the Exchequer. Scott Bessant.
In a video on X, Bessent accused critics of “cherry pick.”[ing]’data to paint a one-sided, negative picture of the economy.
“You can’t pick cherries,” says Bessent. “Inflation is a composite number.” He argued the Donald Trump The government has managed to tame the “terrible affordability crisis” it inherited, pointing to falling prices for things like eggs and petrol.
See also: Trump Tariffs May Boost Margins, But Not Inflation, Economist Says
Rate-induced price increase offsets rent relief?
“Rents are coming down,” Bessent pointed out, highlighting the latest core monthly inflation rate of 0.2% as “the lowest in a long time.”
However, Elliott’s note uses private sector graphs to argue that this focus on rental prices is misleading.
He claims that the “steady disinflationary pressures arising from calculated rents… are more than offset” by the new rate-related inflation. His analysis points to data showing record high prices for new cars and a “notable increase in prices” for both domestic and imported goods.
A break in the inflation debate
The clash highlights an important divide in the inflation debate. The Federal Reserve and the government have indicated that they will “see through” the rate increases, with Jerome Powell seeing them as a “one-time shift in the price level” rather than a permanent trend.
But as Elliott’s note concludes, while policymakers can ignore price increases to set policy, “households and businesses cannot.”
On Monday, futures for the S&P 500, Dow Jones and Nasdaq 100 indexes traded higher.
Meanwhile, the S&P 500 index ended Friday 0.79% higher at 6,791.69, while the Nasdaq 100 index rose 1.04% to 25,358.16. On the other hand, the Dow Jones rose 1.01% to end at 47,207.12.
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Disclaimer: This content was produced in part using AI tools and was reviewed and published by Benzinga’s editorial staff.
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