Dean Baker says he would have preferred no Fed hike against tariff- and Iran-war-driven inflation, citing slowing wage growth (year-over-year 3.1%, recent annualized 2.7%) and no 1970s-style wage-price spiral—but he would still have hiked because markets had already priced one in after Chair Kevin Warsh’s Jackson Hole remarks.

He argues President Trump’s claim that a “hot” economy should get the lowest rates is backward, and that calling a unanimous Fed vote—including Trump’s own appointees—a plot to make him look bad fits a pattern of treating disagreement as conspiracy, as with the Supreme Court mail-in ballot ruling.

Baker warns Trump’s floated response—cutting trade with countries that run a surplus with the U.S.—would raise prices further, rests on a misunderstanding of trade deficits, and, if courts delay a check, would push other countries to plan around an unreliable United States.

I had intended to write on the Fed’s decision to raise rates, but I don’t have much to add to what I wrote last week. I do think inflation is high, and for the moment the labor market seems reasonably healthy. But I don’t see higher rates as being a useful way to combat inflation caused by tariffs and Trump’s war on Iran.

As I noted, there is no case for the sort of wage-price spiral we saw in the 1970s. Wage growth has actually slowed sharply over the last two years. Wages had been growing at over a 4.0% annual rate in 2023 and 2024. The year-over-year rate has fallen to........

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