U.S. Budget Deficit Jumps in December as Trump Presses Powell to Cut Rates After Softer Inflation Data
The U.S. Treasury said the federal government recorded a $145 billion budget deficit in December, marking a 67% increase, or about $58 billion, compared with the same month last year. The sharp rise was driven by record-high spending, which was inflated by calendar shifts that affected the timing of certain benefit payments and revenue collections.
The report also showed that growth in tariff revenues may be stabilizing. Net customs revenues totaled $27.9 billion in December, down from around $30 billion in recent months, but still significantly higher than the $6.8 billion recorded in December 2024.
During the first three months of fiscal year 2026, which began on October 1, net customs revenues reached $90 billion, compared with $20.8 billion in the same period a year earlier, reflecting the impact of tariffs imposed under President Donald Trump.
Meanwhile, President Trump welcomed December inflation data, saying it supports his push for the Federal Reserve to cut interest rates. The closely watched core consumer price index (CPI) rose 2.6% year-on-year, below market expectations of 2.7%, while headline inflation stood at 2.7%, unchanged from November.
Speaking to reporters before departing for Detroit, Trump said:
“We have very low inflation, and that should give ‘Too Late Powell’ the chance to make a big and beautiful cut in interest rates.”
Earlier in the day, Trump wrote on social media that the inflation data mean Fed Chair Jerome Powell “should cut interest rates substantially.”
However, consumer prices increased in December compared with November, reinforcing expectations that the Federal Reserve will keep interest rates unchanged at its upcoming meeting.
The latest developments come amid renewed tensions between Trump and Powell, as the president has repeatedly called for lower interest rates. The administration’s decision to open a criminal investigation into Powell has drawn condemnation from former Federal Reserve chairs and sparked criticism from senior members of the Republican Party, to which Trump belongs.
