Jerome Powell kept rates unchanged as our computer was projecting. However, he did weigh in on the state of the US economy, pointing out that Donald Trump’s policies were one reason why inflation is turning back up. He also reduced the Fed’s 2025 growth projection, noting that uncertainty around the slowing economy is increasing. The Fed is well aware of the Economic Confidence Model. Both Canada and the Fed started to lower rates when the ECM was turned down last May.

Powell said, “Inflation has started to move up,” adding that “there may be a delay in further progress over the course of this year.” The confusion people have is that, as I have pointed out before, government employees are counted TWICE in GDP. First as total government spending and second as total personal income. So, firing government employees will have a large,r more exaggerated impact on GDP going forward.

Investors have reacted negatively to Trump’s global trade war and the mounting retaliation from abroad. What they fail to grasp is that the main reason companies left the USA was over worldwide taxation. American companies were always at a disadvantage when compared to Europeans competing in the world market. The S&P 500 fell nearly 10% from mid-February because of the failure to understand the real trade impact of the high tariffs. Trump, meanwhile, has perhaps promoted recession fears, with the Republican saying the economy faces a “period of transition” and that his tariffs will eventually mean more US jobs.

Socialist academic economists do not look beyond our shores and say that Trump’s tariffs will be a significant loss. They compare this to the Smoot-Hawley tariffs of the 1930s, blaming them for the Great Depression because they are incapable of thinking about two variables simultaneously. The tariffs were primarily on agriculture because the Dust Bowl reduced crops, and Europe offered them cheaper. The economy was 41% employed in agriculture, and that is why unemployment soared to 25%. No legislation could have made it rain.

Powell admitted that recession odds had moved up but weren’t high. He disagreed with the University of Michigan survey, which showed a sharp increase in long-term inflation expectations. We agree. Socrates is showing that volatility in inflation was to begin here in 2025 and rise stronger in 2026, but it will be the 2027-2028 period when it becomes critical that it is correlated with our war models.