We see reversion in the Bordo-Siklos measure of inflation credibility back toward pre-Trump 2.0 levels. However, we’ll see if this is recovery is durable in the wake of Trump’s attacks on Fed independence (including a historic non-ceremonial visit by a sitting President).

Figure 1: Bordo-Siklos measure of Fed inflation credibility (blue). Calculation assumes CPI target consistent with PCE target is 2.45%. July observation is preliminary. Light orange shading denotes Trump administrations. Orange dashed line at “Liberation Day”. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, NBER, author’s calculations.