Washington, DC, December 9, 2025 --  

Rising inflation and falling interest rates are poised to erode the savings of unsuspecting Americans.

This week's Federal Reserve interest rate decision was made flying blind. U.S. government statistics for hiring and inflation date only to September due to the government shutdown.¹ One thing is certain -- after several rate cuts in the past 15 months, interest rates are now just barely above the level of inflation.

September numbers from the Bureau of Labor Statistics said that inflation had ticked up 0.3 percentage points on an annualized basis to 3 percent after a similar rise in August.² Numbers for October were never even collected and numbers for November won't be available until December 18.

At just over 3 percent, the Federal Funds interest rate hardly above inflation. Americans with interest bearing accounts can now do nothing more than stop money from losing value. Should inflation tick up and the federal funds rate stay unchanged, Americans with savings will begin to erode.

Over the past 70 years, interest rates have typically been a bit over one percentage point higher than inflation. But after the financial crisis this common sense rule took a long holiday. Spooked by the risk of a new depression, central banks dropped interest rates to nearly zero to prop up the global economy. Amazingly, this flood of easy money did not spark major inflation until the global pandemic. The first Trump and Biden administrations both handed out $800 billion in three rounds of government stimulus checks³ spawning inflation that peaked at nearly 10 percent in 2022.

That inflation spike effectively ended the post-financial crisis era of near zero interest rates and signaled a return to normal. But that return to normal did not last long. What changed? Donald Trump.

A real estate developer by trade, America's president loves low interest rates -- they help move real estate. He has threatened to fire the hawkish Federal Reserve Chairman Jerome Powell (a Republican), for being slow to lower interest rates. He has also attempted to fire Federal Reserve Board member Lisa Cook, a move suspended by the Supreme Court, probably motivated by his desire to pack the board with his own supporters. And his presumed picks for a new Federal Reserve Chairman, White House economic advisor Kevin Hassett, has a long record of calling for interest rate cuts⁴.

Ironically, Trump's 2024 electoral victory was partly based on public anger over high inflation during the middle of Joe Biden's presidency. What if the second Trump era's relentless rate cutting spurs higher inflation? No problem. "We fixed inflation," Trump told Pennsylvania supporters last week.⁵

Does Trump himself believe this? Was he even briefed on the Bureau of Labor Statistics inflation numbers for September? Or does he simply reject numbers he doesn't like? That's exactly what happened in August when Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer over a jobs report with statistics that he said made him look bad.⁶

This is the risk for 2026. The Federal Reserve will be under pressure by the Tump Administration to lower interest rates, led by a newly appointed Trump loyalist. The Bureau of Labor Statistics will be under pressure to report higher jobs and lower inflation numbers, lest Trump get angry at the statistics and fire the commissioner again for making him look bad. Unless professionals at both BLS and the Fed manage to hold tight, expect interest rates to fall below the real level of inflation (regardless of what the Trump-controlled BLS says inflation is.)

Meanwhile, inflation risks abound. From high tariff rates making imports more expensive, to America's growing budget deficit increasing the money supply to an expected spike in health care costs driven by and end to Obamacare subsidies. Trump's claim to have "fixed inflation" might soon become something that nobody but he and his coterie of yes men actually believe.

That's bad news for America's savers, who will see the value of their money erode in interest bearing accounts. The stock market will be a poor alternative, as today's sky-high valuations depress future returns until earnings catch up. A report from Vanguard estimates that U.S. stock market returns over the next 10 years will be at only 2.8 to 4.8 percent.⁷ The low end of that estimate is already below September inflation.

Three main takeaways: You can't trust that the Fed will keep inflation low. You should be skeptical of America's official inflation statistics so long as Trump keeps threatening statisticians. You will need to scour the globe far and wide to find places to tuck your money where it won't lose value.

Voters angry about Biden-era inflation may soon find themselves right out of the frying pan and into the fire.

Related Web Columns:

No Going Back, September 3, 2024

Dictators and Day Traders, May 14, 2024

Worrying Trends, February 21, 2022

Notes:

1. CBS News, Federal Reserve to Announce Next Interest Rate Move on Wednesday. Here's What to Expect, December 8, 2025

2. Bureau of Labor Statistics, Consumer Price Index Summary, October 25, 2025

3. Pandemic Oversight, Update: Three Rounds of Stimulus Checks. See How Many Went Out and for How Much, February 9, 2023

4. Al Jazeera, Who is Kevin Hassett, Trump’s Expected Pick to Lead the Federal Reserve? December 4, 2025

5. Fortune, "We Fixed Inflation, and We Fixed Almost Everything": Trump Travels to Pennsylvania to Talk Affordability While Denying It's a Problem, December 4, 2025

6. Economic Policy Institute, Firing BLS Commissioner Erika McEntarfer, August 5, 2025

7. Vanguard Capital Markets Model Forecasts, October 22, 2025