Inflation, but make it political
Mark Zandi is basically telling investors not to blame inflation on some cosmic accident. His argument: tariffs and tighter immigration policies are doing a good chunk of the damage, and that shows up in everything from groceries to electronics.
The policy bill comes due
Here’s the gist of his math:
- Broad tariffs added nearly 0.5 percentage points to inflation last year
- They’re expected to add another 0.2 points this year
- Restrictive immigration is squeezing labor supply in areas like construction and agriculture, which keeps wages and prices stubborn
That’s a messy cocktail if you’re hoping the Fed can just wave a magic wand and get back to 2% inflation.
The counterweight: disinflation is still lurking
Zandi isn’t saying prices only go up. He points to softer labor markets, moderating labor costs, rising vacancy rates, falling rents on new leases, and weak vehicle prices as forces pulling inflation lower. In other words, the economy has a tug-of-war going on — and policy is apparently winning the wrong side.
The backdrop matters because inflation expectations still shape everything from interest-rate bets to consumer spending. If inflation is policy-driven, then policy changes can move markets fast. Big picture: the market may love a clean narrative, but this one comes with tariffs, immigration, and a side of political drama.