Inflation increased in January, posing obstacle for Trump tariff plans
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(NEW YORK) — Consumer prices rose 3% in January compared to a year ago, ticking up from the previous month and posing an obstacle for Trump administration tariff policies that many economists expect to raise some prices, government data on Wednesday showed. The inflation reading came in higher than economists had predicted.
The fresh data extends a bout of resurgent inflation that stretches back to last year. Two weeks ago, the Federal Reserve opted to hold interest rates steady in part out of concern regarding the stubborn price increases.
Egg prices, a closely watched symbol of rising costs, soared 53% in January compared to a year ago. An avian flu has decimated the egg supply, lifting prices higher.
Beef prices climbed 5% and bacon prices jumped 6% in January compared to a year ago, data showed. By contrast, prices dropped over that same period for bread, rice and tomatoes.
Core inflation — a measure that strips out volatile food and energy prices — increased 3.3% over the year ending in December, ticking lower than the previous month, the data showed. That gauge also sped up from the previous month.
Inflation has slowed dramatically from a peak in June 2022, but price increases remain a percentage point higher than the Fed’s target rate.
Since Trump took office on Jan. 20, he has announced a series of tariffs, which economists say could push prices higher. Tariffs on steel and aluminum announced by Trump this week could raise prices for a set of products that includes refrigerators, beer and automobiles, experts previously told ABC News.
In a post on Truth Social on Wednesday morning, Trump appeared to fault former President Joe Biden for the uptick in inflation, writing: “BIDEN INFLATION UP!”
Biden served during more than half of the month of January, leaving office on Jan. 20. Trump, however, said during the presidential campaign earlier this year that he would bring down prices “starting on day one.”
This is a developing story. Please check back for updates.
(WASHINGTON) — The Federal Reserve held interest rates steady on Wednesday, just days after President Donald Trump called on the central bank to lower them.
The announcement put the central bank on a potential collision course with Trump, though a longstanding norm of independence typically insulates the Fed from direct political interference.
The decision to maintain the current level of interest rates pauses a series of three consecutive interest rate cuts imposed by the Fed over the final months of 2024.
The Federal Open Market Committee (FOMC), a policymaking body at the Fed, said on Wednesday that the central bank remains attentive to concerns centered on the potential for both a rise in unemployment and a surge of inflation. Inflation stands at a moderately elevated rate, while unemployment remains at a historically low level, the FOMC added.
Taken together, those two considerations — employment and inflation — make up the Fed’s “dual mandate.”
“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance,” the FOMC said.
“The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
The Fed indicated last month that it would cut interest rates at a slower pace than it had previously forecast, however, pointing to a bout of resurgent inflation. That forecast sent stock prices plummeting, though markets have broadly recovered the losses.
Inflation has slowed dramatically from a peak of more than 9% in June 2022, but price increases remain nearly a percentage point higher than the Fed’s target rate of 2%.
During a virtual address to the World Economic Forum in Davos, Switzerland, last week, Trump demanded a drop in interest rates after calling for a reduction of oil prices set by a group of nations known as OPEC, which includes Saudi Arabia.
The prospect of low oil prices will enable the Fed to dial back its fight against inflation and bring down interest rates, Trump said.
“I’m going to ask Saudi Arabia and OPEC to bring down the cost of oil,” Trump said, later adding: “With oil prices going down, I’ll demand that interest rates drop immediately.”
The U.S. does not belong to OPEC, nor does the president play a role in the organization’s decisions regarding the price of oil sold by its member states.
Several past presidents have sought to influence the Fed’s interest rate policy, including Trump, who repeatedly spoke out in favor of low interest rates during his first term.
On the campaign trail in August, Trump said a U.S. president should have a role in setting interest rates.
Fed Chair Jerome Powell struck a defiant tone in November when posed with the question of whether he would resign from his position if asked by Trump.
“No,” Powell told reporters assembled at a press conference in Washington, D.C., blocks away from the White House.
When asked whether Trump could fire or demote him, Powell stated: “Not permitted under the law.”
The Fed retreated in its fight against inflation over the final months of last year, lowering interest rates by a percentage point. Still, the Fed’s interest rate remains at a historically high level of between 4.25% and 4.5%.
Last month, Powell said the central bank may proceed at a slower pace with future rate cuts, in part because it has now lowered interest rates a substantial amount.
Powell also said a recent resurgence of inflation influenced the Fed’s expectations, noting that some policymakers considered uncertainty tied to potential policy changes under Trump.
“It’s common-sense thinking that when the path is uncertain, you get a little slower,” Powell said. “It’s not unlike driving on a foggy night or walking around in a dark room full of furniture.”
(NEW YORK) — While Elon Musk has vaulted into a powerful role overhauling government agencies and upending Washington, the world’s richest person has suffered a $106 billion drop in wealth due to steep decline in shares of his Tesla electric car company.
Tesla’s stock price has plummeted 30% from its all-time high in December, including a 21% selloff since Inauguration Day. The losses have sent Musk’s net worth tumbling from a peak of $486 billion on Dec. 17 to its current level of about $380 billion, according to Bloomberg.
The stock woes have divided current and former Tesla shareholders. Critics of Musk fault his new role and polarizing reputation, blaming recent reports showing lackluster sales in some regions on his foray into politics. They say Musk must step away from the Trump administration for the company to thrive.
Supporters, on the other hand, say Musk’s role in the White House has little to do with the selloff, noting that Tesla shares remain higher than where they stood on Election Day. Instead, some say, the company is suffering growing pains as it weathers stiff competition in electric vehicles and pursues new ventures like self-driving taxis.
“I don’t have a problem if Elon wants to save a bunch of money for America. I say, ‘Where’s the good part in this for Tesla'” Ross Gerber, a prominent Tesla investor, told ABC News, referring to cost-cutting efforts undertaken by Musk’s Department of Government Efficiency.
Tesla representatives did not respond to ABC News’ request for comment.
Despite disagreement over the effect of Musk’s government role, both current and former Tesla shareholders who spoke to ABC News broadly acknowledged the company’s recent business hiccups.
Tesla sold fewer cars in 2024 than it did the year prior, marking the company’s first year-over-year sales decline in more than a decade, earnings released in January showed.
As rivals have challenged Tesla’s dominance over the electric vehicle market, the company has promised a future revenue stream from autonomous taxis, also known as robotaxis.
Musk announced in late January that the company would roll out its robotaxi test program in Austin, Texas, in June. But within days, China-based competitor BYD unveiled advances in self-driving technology, which the company said was set to be included in models costing as little as $9,600.
Gary Black, managing partner of The Future Fund, which manages $100 million in assets, including Tesla shares, said the recent selloff of Tesla is primarily the result of investor jitters about whether the company can dominate self-driving technology the way it did electric vehicles.
“Over time, you will see Teslas and other cars self-drive. But Tesla is not going to be the only one,” Black told ABC News’ Elizabeth Schulze.
The stock also faced downward pressure this week when a Musk-led group of investors offered to buy OpenAI for $97.4 billion, making possible a scenario in which Musk would sell some of his Tesla shares to finance the deal, Black said.
Black said that, in his opinion, the downturn has nothing to do with Musk’s government role.
“It’s always good to know the president of the United States — to be able to pick up your phone and say, you know, ‘I need this favor, that favor,'” Black said.
A jump in Tesla shares after Trump’s victory suggests many investors viewed the relationship that way. The stock price soared about 85% over a six-week period following Election Day.
But some investors lay the blame for the downturn squarely at Musk’s feet.
Nell Minow, Vice Chair of ValueEdge Advisors and a longtime critic of Musk, said Musk has been “absent” from the company.
“I think that he is a huge drag on the stock right now,” Minow told Schulze. “No question, he’s a problem.”
“Elon Musk is to the Tesla brand what the Green Giant is to corn,” Minow said. “He has made himself the brand and that is always very risky.”
Minow, who said she donated nearly all of her Tesla shares to charity last year, also criticized the Tesla board for what she said was a failure to hold Musk to account, or update shareholders and the public about a leadership plan while Musk runs DOGE.
“We don’t know what the board is thinking. They have not spoken out in any way,” Minow said. “They have not made a filing with the SEC about what the impact of this side hustle is, and the employees and the shareholders need some kind of certainty.”
New York City Comptroller Brad Lander echoed concerns about the board’s ability to reign in Musk. Lander, who oversees $1.25 billion in Tesla stock through the city’s five pension systems, said the lack of oversight was a “long-standing problem.”
“Independent governance is designed to provide a voice for shareholders at the table,” Lander, who is running for New York City mayor and has publicly sparred with Musk, said in a statement to ABC News. “When companies are controlled by a set of directors with either family or aligned interests, they lose this.”
For his part, Musk has looked to hype up Tesla’s prospects, saying on an earnings call last month that he believes there is an opportunity for it to be “the most valuable company in the world.”
During the call, AllianceBernstein Research analyst Daniel Roska questioned Musk on how Tesla plans to meet its ambitious projections given its high valuation.
Musk emphasized Tesla’s focus on real-world AI, claiming the company is making significant strides.
“We’re working on perfecting real-world AI and making rapid progress week over week, if not month over month,” Musk said. “I go where the problem is, essentially … I focus where the challenges are the greatest.”
Some Tesla shareholders remain bullish on the company despite its short-term drop. Angel investor Larry Goldberg, known as “Tesla Larry,” posted on X that he supports Musk’s political efforts, even if they impact the company’s stock price.
“If the Trump administration (and DOGE) does not fix the deficit, my Tesla shares — and everyone’s US stocks and bonds will be worthless,” Goldberg wrote.
(NEW YORK) — U.S. stocks tumbled in early trading on Thursday as fallout from the Trump administration’s tariffs continued to roil markets.
Stocks recovered some of the losses within hours, however, after Commerce Secretary Howard Lutnick said a one-month delay of tariffs on Mexico and Canada would likely apply to all products compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
Trump negotiated the USMCA during his first term, signing the agreement with Canada and Mexico in 2018.
“That which is part of President Trump’s deal with Canada and Mexico [is] likely to get an exemption from these tariffs,” Lutnick told CNBC on Thursday morning.
The Dow Jones Industrial Average fell about 150 points, or 0.35%, while the S&P 500 fell 0.7%. The tech-heavy Nasdaq dipped 0.9%.
The selloff erased some of the market gains delivered a day earlier after President Donald Trump gave U.S. automakers a one-month reprieve from the tariffs. Duties on a host of other goods remained in place, however.
The U.S. earlier this week slapped 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
The one-month delay in auto tariffs triggered a rally for shares of U.S. carmakers on Wednesday, but the largest companies in the sector turned down in early trading on Thursday.
Shares of Ford dropped 1.5%, while General Motors fell nearly 3%. Stellantis — the parent company of Chrysler and Jeep — saw its stock price fall 2%.
Tesla, the electric carmaker led by Elon Musk, tumbled 4.5% on Thursday.
The tariffs are expected to pose a challenge for U.S. automakers, many of which depend on a supply chain closely intertwined with Mexico and Canada.
The American Automotive Policy Council, or AAPC, a trade group that represents Ford, General Motors and Stellantis, praised the one-month tariff exemption.
“American Automakers Ford, GM and Stellantis applaud President Trump for recognizing that vehicles and parts that meet the high US and regional USMCA content requirements should be exempt from these tariffs,” AAPC President Matt Blunt told ABC News in a statement.
This is a developing story. Please check back for updates.
