Uh-Oh! A New Inflation Forecast Suggests Trumpflation Is Evolving and Worsening.
The Federal Reserve’s preferred inflation gauge appears to be headed in the wrong direction.
Donald Trump's presidency has seen the stock market perform exceptionally well, with higher-than-average returns for key indices like the Dow Jones, S&P 500, and Nasdaq. However, not all of Trump's policies have been met with investor approval. Trump's policies are believed to be influencing consumer prices, with inflation being a significant concern. Recent forecasts suggest that Trumpflation, or the effect of Trump's policies on inflation, is evolving and worsening.
A new report from the New York Federal Reserve highlights that tariffs and the Iran war are directly contributing to inflation. Tariffs have increased goods price inflation by 2.9 percentage points as of February 2026. The Iran war has disrupted petroleum supply, leading to higher gas and diesel prices. While headline inflation has slightly moderated from its May 2026 high, forecasts predict Core Personal Consumption Expenditures (PCE) to climb to 3.05% in September and 3.13% in October, marking the highest monthly reading since January.
This evolution of Trumpflation could pressure the Federal Reserve to adopt more aggressive interest rate hikes. This scenario presents a potential worst-case outcome for the historically expensive stock market, which has been driven by debt financing amid the AI data center build-out.
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