Marketdash
Back to News

Moody's Chief Economist: Tariffs And Immigration Cuts Are Fueling An Affordability Crisis

MarketDash Editorial Team
14 days ago
Mark Zandi says policy choices are keeping inflation stuck near 3%, well above the Fed's target, with lower-income households bearing the brunt of rising costs.

The U.S. economy is stuck in what Mark Zandi calls a "serious affordability crisis," and he's pointing fingers at specific policy decisions for making it worse.

Policy Choices Are Keeping Prices Elevated

Zandi, Chief Economist at Moody's Analytics, laid out his case in a recent analysis on X. The problem? Consumer price inflation is sitting near 3%, stubbornly above the Federal Reserve's 2% target. And according to Zandi, this isn't just bad luck or economic cycles—it's the direct result of higher tariffs and restrictive immigration measures that are effectively "juicing" inflation.

Here's the frustrating part: it didn't have to be this way. Zandi notes that earlier in the year, inflation was actually slowing down and heading back toward the Fed's target. Things were looking up. But then a combination of aggressive tariffs, highly restrictive immigration policies, and broader de-globalization trends "upended that outlook."

The Forecast Shows A Troubling Split

Moody's Analytics released data visualizing exactly what these policies are costing us. The forecast compares two scenarios: the current baseline with tariffs and immigration restrictions versus an alternative with no tariffs and typical immigration levels.

The divergence is pretty stark. In the scenario without tariffs, inflation would dip comfortably toward the Fed's target by 2026. Under current policies, though, inflation spikes upward again in 2025 and stays elevated through the following year. Zandi's warning is blunt: everything points to "even higher inflation dead-ahead."

Lower-Income Families Are Taking The Hit

The economist painted a grim picture for American consumers, especially those in lower income brackets. Echoing views from economist Justin Wolfers, Zandi emphasized that the burden of these macroeconomic shifts falls disproportionately on low- and middle-income households already struggling with high prices for everything from groceries to automobiles.

This affordability crisis gets worse when you factor in a job market that's struggling to create positions and slowing wage growth. With the economic outlook shifting due to these protectionist measures, Zandi predicts that the "tough financial times" Americans are dealing with will continue for the "foreseeable future."

Despite the gloomy inflation outlook, markets showed some resilience. Futures for the S&P 500, Nasdaq 100, and Dow Jones indices were trading higher on Monday following a positive close on Friday. The SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 index and the Nasdaq 100 index respectively, both closed higher on Friday. The SPY was up 1.00% at $659.03, while the QQQ advanced 0.75% to $590.07.

Back to News

Moody's Chief Economist: Tariffs And Immigration Cuts Are Fueling An Affordability Crisis

MarketDash Editorial Team
14 days ago
Mark Zandi says policy choices are keeping inflation stuck near 3%, well above the Fed's target, with lower-income households bearing the brunt of rising costs.

The U.S. economy is stuck in what Mark Zandi calls a "serious affordability crisis," and he's pointing fingers at specific policy decisions for making it worse.

Policy Choices Are Keeping Prices Elevated

Zandi, Chief Economist at Moody's Analytics, laid out his case in a recent analysis on X. The problem? Consumer price inflation is sitting near 3%, stubbornly above the Federal Reserve's 2% target. And according to Zandi, this isn't just bad luck or economic cycles—it's the direct result of higher tariffs and restrictive immigration measures that are effectively "juicing" inflation.

Here's the frustrating part: it didn't have to be this way. Zandi notes that earlier in the year, inflation was actually slowing down and heading back toward the Fed's target. Things were looking up. But then a combination of aggressive tariffs, highly restrictive immigration policies, and broader de-globalization trends "upended that outlook."

The Forecast Shows A Troubling Split

Moody's Analytics released data visualizing exactly what these policies are costing us. The forecast compares two scenarios: the current baseline with tariffs and immigration restrictions versus an alternative with no tariffs and typical immigration levels.

The divergence is pretty stark. In the scenario without tariffs, inflation would dip comfortably toward the Fed's target by 2026. Under current policies, though, inflation spikes upward again in 2025 and stays elevated through the following year. Zandi's warning is blunt: everything points to "even higher inflation dead-ahead."

Lower-Income Families Are Taking The Hit

The economist painted a grim picture for American consumers, especially those in lower income brackets. Echoing views from economist Justin Wolfers, Zandi emphasized that the burden of these macroeconomic shifts falls disproportionately on low- and middle-income households already struggling with high prices for everything from groceries to automobiles.

This affordability crisis gets worse when you factor in a job market that's struggling to create positions and slowing wage growth. With the economic outlook shifting due to these protectionist measures, Zandi predicts that the "tough financial times" Americans are dealing with will continue for the "foreseeable future."

Despite the gloomy inflation outlook, markets showed some resilience. Futures for the S&P 500, Nasdaq 100, and Dow Jones indices were trading higher on Monday following a positive close on Friday. The SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 index and the Nasdaq 100 index respectively, both closed higher on Friday. The SPY was up 1.00% at $659.03, while the QQQ advanced 0.75% to $590.07.