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With inflation running above the Federal Reserve’s target for 64 consecutive months, Moody’s Analytics Chief Economist Mark Zandi says higher consumer prices are not an accident but a direct result of government policy decisions.
By breaking down the underlying economic math, Zandi points to trade tariffs imposed by the Donald Trump administration and restrictive immigration laws as the primary culprits preventing price stability in the current economy.
The Cost of Policy Choices
Americans largely view “persistently high inflation and the resulting higher cost of living their number one financial problem.” Zandi agrees with this public sentiment, noting that top-line inflation sits at no less than 3.5%, which is well above the Federal Reserve’s 2% target.
Through a detailed decomposition of economic tailwinds and headwinds, Zandi emphasizes that the current economic squeeze is deliberately engineered. “Netting out the inflation tailwinds & headwinds, it’s clear the uncomfortably high inflation is the result of policy choices,” he stated.
Tariffs and Immigration Fuel Prices
Zandi’s analysis highlights the specific policies driving this surge. He noted that higher broad-based tariffs added nearly 0.5 percentage points to inflation last year and are projected to add another 0.2 points this year.
Furthermore, “highly restrictive immigration, a policy choice, is steadily adding to inflation” by diminishing the available workforce in essential sectors like construction and agriculture.
Coupled with the Iran war and energy surges, these factors create significant upward price pressure. Without these specific policy hurdles, Zandi argues inflation would have been 2.2% last year and “effectively at the Fed’s target” this year.
Underlying Disinflation Forces
Despite these pressures, fundamental economic forces are actually working to lower prices. “A soft job market and moderating labor costs, rising vacancy rates and falling rents on new leases, and weak vehicle prices are all leaning against inflation,” Zandi explained.
The U.S. Bureau of Labor Statistics reported immediate relief in its June 2026 summary. The CPI decreased by 0.4% on a seasonally adjusted basis, representing the largest one-month decline since April 2020.
Ultimately, Zandi notes that while these foreign and domestic policies may have other objectives, their immediate costs show up in groceries and electronics.
His conclusion is stark and leaves little room for debate: “If the policies end, inflation will recede with them. High inflation is a policy choice. So too, it turns out, is low and stable inflation.”
How Have Markets Performed In 2026?
The S&P 500 index has advanced 8.53% year-to-date. Similarly, the Nasdaq Composite index was up 9.78%, and the Dow Jones gained 7.14% YTD.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 and Nasdaq 100, respectively, were higher in premarket on Tuesday. The SPY was up by 0.46% at $745.50, while the QQQ advanced by 1.23% to $704.63.
Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust DIA, was 0.45% higher at $520.26 on Tuesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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This article Economist Mark Zandi Blames Trump Tariffs, Restrictive Immigration Policies for Higher Cost of Living: 'High Inflation Is a Policy Choice' originally appeared on Benzinga.com.
