January’s Consumer Price Index (CPI) rose to 3.0 percent, up 0.1 percent from December 2024, representing a surprise to the financial markets and economists.
The inflation bump-up could be disappointing for U.S. consumers, who might have been warming up to the idea that inflation—and high prices—were trending downward.
“Inflation is still high for various reasons,” Jason DeLorenzo, owner and principal at Virgina-based Ad Deum Funds, told NTD. “Part of it is idiosyncratic, such as egg prices, which are affected by a breakout of the bird flu in the chicken population. Part of it is measurement related, such as shelter costs having lease lag in their calculation.”
Yet some of the ongoing inflation problems are systematic.
“The government has had excessive deficits since the Covid pandemic,” DeLorenzo notes. “These deficits cause inflation as money is implicitly created through bond issuance.”
To put things in perspective, after the 2007–2008 global financial crisis, the government peaked at a $1.4 trillion budget deficit.
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That deficit expansion has significantly contributed to rising commodity prices, which plague consumers.Commodity | 12-Month Price Change (%) |
| Auto Insurance | 11.8 |
| Airfare | 7.1 |
| Prescription drugs | 4.5 |
| Rent | 4.2 |
| Housing | 3.9 |
However, investors are concerned that a short-term inflation antidote may do more harm than good.
“If the Trump administration wants to make good on their promise to bring down prices, they are going to have to cause deflation, which presents its own issues,” DeLorenzo noted. “The Federal Reserve can increase interest rates to make everything more expensive than the listed price, but that creates a wealth disparity between those who save and those who spend or can't save.”
The Trump administration would prefer to lower their deficit spending by cutting costs or raising revenue, yet that also triggers some problems, he added.
“They’re trying to reduce government spending through DOGE, raising revenue through tariffs, and deporting immigrants, which they see as taking public funds,” DeLorenzo said. “This should reduce inflation, but will also reduce aggregate demand and can cause a major recession.”
One smart move consumers can make is to stay out of unproductive debt.
“Yet the opposite has been happening, as credit card balances are at all-time highs and credit delinquencies have been increasing,” DeLorenzo said. “Consumers need to get out of debt and start putting their money into high-yield savings accounts, or investing in yield-bearing instruments like treasury or corporate bonds that increase their yields as inflation rages.”
In truth, the cure to inflation is less spending.
“It will likely cause a recession but put America in a much better position financially, both individually and collectively,” he added.