Forecasters place chances of the so-called Republican Sweep scenario at a 35 percent probability. 

And in those circumstances, the report projects consumer price inflation accelerating from 3 percent in 2024 to 3.6 percent in 2025 – fueled in part by Trump policies, like higher tariffs, tax cuts that stimulate the economy and an exodus of immigrants that could tighten the labor market and increase labor costs.

“The Federal Reserve, which is focused on labor costs and inflation, may feel compelled to resume its rate hikes, or at the very least wait longer to cut rates. Recession becomes a serious threat once again,” the economists wrote.

By contrast, if President Biden wins this November, the report said the victory would have no impact on the economists’ baseline inflation forecast of 2.4 percent in 2025.

If Biden wins the White House but there’s a divided Congress, which Moody’s set at a 40 percent probability, the economists projected inflation to continue to fall and return to the Fed’s 2 percent target by summer 2025.

Inflation is a key issue for voters ahead of the election, according to polling. Biden has dealt with low approval ratings on his handling of the economy, due largely to the roughly 19-percent increase in prices since he took office in 2021.

Inflation spiked around the world thanks largely to pandemic-related supply chain snarls, a rapid economic resurgence and the war in Ukraine. U.S. inflation has also fallen sharply from a peak of 9.1 percent in June 2022 to just above 3 percent. Even so, Biden is struggling to win voters over on the economy.

The Fed has hiked interest rates to a 23-year high to try to bring down pandemic-induced inflation. It’s expected to start cutting interest rates later this year provided inflation continues to come down. 

The Hill’s Taylor Giorno has more here.