How rising US inflation data is piling pressure on Donald Trump

Good morning and welcome to White House Watch. Let’s dive into:

• New inflation figures pile pressure on Trump administration

• US carries out fresh round of strikes against Iran

• The president baffles Wall Street with his praise of Citi

Donald Trump’s inflation problem just keeps getting worse. With five months until the midterm elections and no end in sight to the war in Iran, data released on Wednesday showed the annual consumer price index rising by 4.2 per cent last month, its fastest pace of increase in three years.

The figures are politically toxic for the White House and every Republican on the ballot in congressional races around the country. But Trump has, however, continued to dismiss voters’ concerns about the cost of living, to the point of exclaiming “I love the inflation” in the Oval Office on Wednesday in a statement that will almost certainly be used by Democrats on the campaign trail.

“The numbers were great,” Trump said, insisting that when the war in Iran ended, inflation would “come down like a rock”.

The rising inflation data also presents a challenge for Kevin Warsh, the new Federal Reserve chair tapped by Trump to lead the US central bank.

At his first monetary policy meeting later this month, Warsh is likely to preside over no change in the Fed’s main interest rate, defying the president’s own calls for lower borrowing costs. He may even have to raise rates if inflation continues to pick up.

Trump and other White House officials have long insisted that the path of the Iran war will not be dictated by domestic economic and political considerations. But if inflation continues increasing as it did last month, it will inevitably pile pressure on the White House to accept a deal that falls short of its goals.

Latest headlines

• The US carried out a fresh round of strikes against Iran as Trump aims to force Tehran to sign a deal to extend the ceasefire, open the Strait of Hormuz and begin nuclear talks.

• Trump’s pick to lead the Bureau of Labor Statistics broke with the president’s claims that the agency had manipulated data. Speaking of another Trump pick, Steve Hilton, the one-time top adviser to former UK prime minister David Cameron, has advanced to the general election for governor of California.

• The president has suggested he will not renew the trade deal he forged with Canada and Mexico in 2020.

• Lockheed Martin cannot give US allies any certainty over when they will receive Patriot missile deliveries, a top executive has warned.

• SpaceX’s initial public offering is unprecedented in size, structure and strategy. It will touch the lives of millions of ordinary investors, tying billions of dollars of their savings to the galactic ambitions of the world’s richest man.

What we’re hearing

Trump’s social media posts often move markets, rattle allies and outrage opponents. But on Wednesday, one of the president’s Truth Social notes baffled the tight-knit world of Wall Street dealmakers.

In a post, Trump congratulated Citigroup and its chief executive Jane Fraser for being ranked first in deal advisory during the first quarter, despite most of Wall Street’s closely followed league tables placing Citigroup behind Goldman Sachs, Morgan Stanley and JPMorgan Chase.

“Wow! CITI was ranked Number 1 in topping M&A Advisory Market by Value in Q1,” Trump wrote on Truth Social. “Congratulations to Jane F and ALL of her great people. They’ve worked really hard! BIG comeback for CITI!!!”

But there may be an explanation. Maria Bartiromo, a prominent Fox Business anchor that Trump follows closely, praised Citi on her show on Wednesday for topping M&A rankings for the power industry, without citing a source. Trump’s post went up about 30 minutes after Bartiromo’s Mornings with Maria ended at 9am.

One embittered rival banker said: “That’s one way to make it at the top of the league tables. Just get Trump to make it up.” 

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Viewpoints

• Trump’s proposal for the US to take equity stakes in AI companies is good politics, but bad economics, argues the FT’s editorial board.

• What happened to the great rebirth of American manufacturing? Brooke Masters points out three major barriers.

• One of the Fed’s most difficult decisions under Kevin Warsh will be finding a way to navigate the central bank’s unofficial mandate to protect global economic stability, notes Josh Lipsky of the Atlantic Council.

• Edward White examines how Trump’s Iran war has propelled China’s clean technology industry after uncertainty clouded the sector at the start of the year.

• When investors can’t tell the difference between financial markets and prediction markets, it’s clear that speculation is flourishing, writes Richard Bernstein, global head of macro investing at Janus Henderson Investors.