Will Fed Cut Rates By 3%? Is Massive Inflation Returning? Economist Steve Hanke Answers

Summary

Steve Hanke, professor of applied economics at Johns Hopkins University, joins David Lin to review June CPI and PPI data and debate the Fed's focus on interest rates versus money supply. Hanke argues inflation remains on a downward trajectory because money supply growth is anemic, while tariffs can cause only temporary price-level blips in tradables. He criticizes both Trump and Powell for ignoring money supply, warns that a 300 basis point Fed cut would unanchor inflation expectations and weaken the dollar, and says Powell should stay to avoid regime uncertainty. The interview also covers Hanke's book and his case for neutral monetary policy.

• June headline CPI rose to 2.7%, while PPI stayed at 2.3%, creating a mixed inflation picture.
• Hanke says CPI/PPI noise and tariff effects should not be confused with the longer-run monetary inflation trend.
• He argues money supply growth around 4.5% is below his 6.3% golden rate and points to lower non-tradable inflation.
• Tariffs are described as one-time taxes or sanctions that can temporarily lift tradable prices but do not drive persistent inflation.
• Hanke gives both Trump and Powell failing grades for treating interest rates as the main monetary policy signal.
• He warns Trump's proposed 300 basis point Fed cut would unanchor inflation expectations and weaken the US dollar.
• He prefers Powell staying in office over a Trump-aligned replacement, citing regime uncertainty.
• The book discussion calls for money-supply-focused, neutral monetary policy and notes commercial banks create most broad money.