Moody’s Analytics Warns of Potential Inflation Surge if Trump Wins Election

Moody’s Analytics has projected a surge in inflation if former US President Donald Trump reclaims the White House

According to a new report by Moody’s Analytics, US inflation could accelerate again if former President Donald Trump wins the White House in the upcoming November election and Republicans secure control of Congress.

The New York-based rating agency’s June analysis evaluates the macroeconomic effects of the policies proposed by the US presidential candidates. 

Moody’s Analytics is one of the major holdings in billionaire investor Warren Buffett’s portfolio. His Berkshire Hathaway company owns 13.5% of Moody’s stock.  

The Moody’s report predicts that Trump’s policies, including higher tariffs on all US imports, tax cuts designed to stimulate the economy, and stricter regulation of illegal immigration that could tighten the labor market, would drive an increase in inflation from its current level of 3.3% to 3.6% by 2025.

The research suggests that the Republican presidential frontrunner’s plan would trigger a recession by mid-2025, resulting in an economy that grows by an average of 1.3% annually during his term. In contrast, the economy would grow at a rate of 2.1% annually under Joe Biden.

A Biden victory would not affect the Moody’s economists’ baseline inflation forecast of 2.4% in 2025. If Biden wins the White House but Congress remains divided—a scenario Moody’s assigns a 40% probability to—the economists anticipate inflation continuing to decline and returning to the US Federal Reserve’s 2% target by summer 2025.

Moody’s analysis concludes that the US would have 3.2 million fewer jobs and a 4.5% unemployment rate by the end of a Trump presidency.

Recent polling conducted by the Pew Research Center indicates that inflation is a key concern for US voters. Inflation has increased by 19 percent since Biden assumed office in 2021, contributing significantly to his consistently low approval ratings.

The Fed has raised interest rates to their highest level in 23 years in an effort to curb inflation, which has decreased from a peak of 9.1% in June to just over 3%. The Fed is expected to begin lowering interest rates this year, contingent upon inflation subsiding.

In November 2023, Moody’s Investor Service (separate from Moody’s Analytics) downgraded its US ratings outlook from stable to negative, citing concerns about high interest rates and rising debt.

The US national debt reached an all-time high of $33 trillion in September. The previous record of $32 trillion was set in June, when Washington averted a technical default by passing legislation that temporarily suspended the national debt ceiling.