Trump’s Real Problem Is Real Wages
The best response is to let Kevin Warsh and the Fed crush inflation.
August’s inflation report offered no political mercy. CPI jumped 0.4% for the month and 3.4% over the past year. Energy drove most of the surge, but that is cold comfort at the pump or the grocery store.
Core inflation looked better on paper—2.4% year-over-year, the softest reading since early 2021. Yet even that figure masks the grind. Shelter, used cars, haircuts, daycare, phone service, and auto repairs all kept climbing. Services inflation remains stubborn. Anyone who has paid a restaurant check lately already knows it.
The real damage shows up in paychecks. Average real hourly earnings fell 0.1% in August and are down 0.3% over the past year. The spring inflation spike erased wage gains. That is why the public feels sour about the economy, and why the President’s job approval on the economy was underwater long before energy prices spiked with the Iran conflict.
Tariffs have not helped. They have fed higher prices. Rate cuts will not magically fix this either. Trump wants the Fed to ease this fall in hopes of midterm gains. At this late date, that is fantasy. It risks signaling that new Chairman Kevin Warsh is not serious about 2% inflation—and long-term rates could rise in response, just as they did after the late-2024 cuts.
The only durable way to lift real wages is to finish the job on inflation. Markets are still buoyant. The labor market remains resilient at 4.1% unemployment. Current policy is not tight enough. A quarter-point hike next week would show the Fed means business. Give Warsh the room to do it. That is the path back to rising real pay—and the only economic remedy that will actually help Republicans.