This week, the Federal Reserve paused rate cuts, and Donald Trump sent a broadside at the central bank, kicking off Trump's second fight against inflation. While Biden and Democrats tried claiming for a while that they'd solved inflation, at least until voters looked at them with confused faces, higher prices continued to linger in the economy. The Fed's throwing on the brakes tells the whole story: inflation is still a problem.

The first part of the equation is the Federal Reserve pausing its rate cuts. It began cutting rates last year, ahead of the election, as fears mounted that the job market was weakening. The Fed claimed it was making headway in the fight against inflation. That changed this week when the official statement deleted all sentences dealing with making progress on inflation and reverted to, "Inflation remains somewhat elevated."

Ideally, the Federal Reserve wants inflation to be around 2% over the long run, and we're running hotter than that right now. If the Federal Reserve cuts interest rates more, it believes that inflation will catch fire again, and all the progress they've made will evaporate. Complicating matters is whether Donald Trump will enforce long-term tariffs or use them as a short-term negotiation tool.

Trump attacked the Federal Reserve in a TruthSocial statement.

Because Jay Powell and the Fed failed to stop the problem they created with inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping inflation, I will make our Country financially, and otherwise, powerful again! The Fed has done a terrible job on Bank Regulation. Treasury is going to lead the effort to cut unnecessary Regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEl, gender ideology, "green" energy, and fake climate change, inflation would never have been a problem. Instead, we suffered from the worst inflation in the History of our Country!

Fed watchers viewed this as a broadside against the Fed. Nick Timiraos wrote in the Wall Street Journal that Trump "picked right up where he left off during his first term, badgering a favorite nemesis—the Federal Reserve and its chair, Jerome Powell."

However, it would be wrong to say that Trump is trying to change Fed policy with his criticisms. He's using them as a foil.

Back in December, during the transition, John Carney reported on what TrumpWorld thought about inflation and the Fed. He wrote, "There's a fear within the Trump camp that too many cuts from the Fed could reignite inflation and that public anger over inflation could cost Trump support."

Most importantly, Carney noted, "While many analysts still believe that Trump is likely to clash with the Fed, most think the clash would be because Trump wants an easier monetary policy than the Fed. The concerns inside of Trump's circles, however, indicate the opposite. They are worried the Fed may be too accomodative."

In the long term, I think Trump wants lower rates and a more accommodative Fed policy. He's a real estate developer at heart and none of those guys like high interest rates. However, if he does that now, both he and his team believe it would trigger inflation to run hotter. The Federal Reserve pausing rate cuts gives Trump something he needs: time.

In the statement, Trump discusses using energy policy and other measures to lower the economy's costs. In short, he's considering using supply-side levers to ease pressure on price increases. The playbook should sound somewhat familiar because it's similar to what Ronald Reagan and Fed Chair Paul Volcker did in the 1980s to kill off the inflation problem that ran rampant through the 1970s.

Reagan's tax cuts and the loosening of regulations eased pressures on the supply side, while Volcker kept interest rates at all-time highs to crush the inflation problem. The problem in the 1980s was that it took a double-dip recession to kill inflation. Then, the economy took off, free from the chains of high inflation and low growth.

Trump's post indicates he's pushing for a lot of policies that will lower inflation. He hasn't signed any executive orders, nor has Congress passed anything. In Trump's case, his tariff threats are center stage, and for Congress, they have focused on getting a continuing resolution in place before there's a government shutdown.

The problem with all of this is that we still don't know how long it will take to truly crush the inflation issue. The Federal Reserve doesn't believe rates can stay at this level forever. No one wants a recession or job losses, but staying in this stasis with inflation running above target doesn't help anyone.

The Biden administration left a thorny issue on inflation for Trump to untangle. Democrats are talking a big game at the moment about the price of eggs—a topic they apparently only figured out existed this month. But the issue is far larger than that, and their ideas like price controls, yelling "Putinflation" or "Greedflation," and the rest haven't solved anything.

That leaves the issue to Trump. The Fed's decision to hold rates and Trump's reaction gives us our first glimpse at Trump's attempt to solve it. We'll have to wait for the policy to kick in.