[Rui Kan America] Can't bear the price and find someone to take the blame?

US Treasury secretary rarely admits to 'misjudging inflation'

　　Zhongxin Finance, June 2 (Gong Hongyu) In the face of the soaring price index and boiling public grievances over the past few months, someone in the US government has finally stood up to "take the blame".

　　On the 31st local time, U.S. Treasury Secretary Janet Yellen admitted in an interview that her past views on the direction of inflation were wrong, and the (U.S.) economy was hit by an unexpected and huge shock, which pushed up energy and food. Prices, supply chain bottlenecks severely impact the economy.

　　This is also Yellen's most direct statement on inflation so far.

FILE PHOTO: U.S. Treasury Secretary Yellen.

Photo by China News Agency reporter Zhang Weiran

Who should pay for inflation  , and

some people are still "throwing the pot"?

　　On May 31, US President Biden met with Yellen and Federal Reserve Chairman Powell at the White House, focusing on the issue of inflation.

　　Unlike Yellen's "admission", Biden said that day that he respects "the independence of the Federal Reserve."

Bloomberg and other media pointed out that this is Biden's intention to pass the responsibility of high inflation to the Federal Reserve.

　　Since the outbreak of the epidemic, in order to stimulate economic recovery, the Federal Reserve led by Powell has implemented a large-scale quantitative easing policy, increased the money supply and increased the purchase of agency MBS and long-term government bonds.

These measures were once regarded as the trigger for the high inflation rate in the United States.

　　In this regard, not only Biden, Yellen and some other government officials have failed to "account" for inflation for a long time in the past.

They maintain that inflation is manageable and could ease in the second half of 2022.

　　For example, in November last year, Yellen vowed not to let US inflation return to the "double-digit era" of the last century.

And since she promised to date, U.S. prices, oil prices, and rents have skyrocketed.

　　He Ping, deputy dean of the School of Economics and Management of Tsinghua University and a professor of the Department of Finance, said in an interview with Zhongxin Finance and Economics that the quantitative easing policy since the epidemic has indeed brought a more obvious inflation crisis to the United States than before.

Affected by factors such as the unblocked supply chain, the United States has experienced a supply-side shortage problem since the epidemic. At this time, increasing currency liquidity eventually led to violent inflation and asset bubbles.

What will be the effect of the Fed's shrinking of its balance sheet?

　　Just the day after Yellen's remarks, on June 1, the Fed's balance sheet reduction, one of the ways to curb inflation, was officially launched.

In this round of shrinking the balance sheet, the Fed plans to reduce its holdings of US Treasuries and MBS (mortgage-backed securities) by a total of $47.5 billion per month, and raise the cap of the shrinking balance to $95 billion per month after three months.

Some media pointed out that the speed of the reduction of the table is more than twice that of 2018.

　　In addition, following two rounds of interest rate hikes, the minutes of the Fed's May 3-4 policy meeting released last week showed that the Fed may raise its benchmark interest rate by 0.5 percentage points at the next two meetings in June and July.

　　Although interest rate hikes and balance sheet reductions are "sequential", Federal Reserve Chairman Powell previously acknowledged that the central bank's ability to control inflation without forcing the economy into recession depends on developments outside the central bank's control, including because of Russia's efforts in Ukraine The global energy market has been severely disrupted by the conflict, as well as supply chain shortages.

　　Luo Zhiheng, chief economist of Yuekai Securities and dean of the research institute, believes that the Fed has raised interest rates and reduced its balance sheet, but the high inflation pressure in the United States will continue throughout the year.

Data show that after the first round of interest rate hikes started, the U.S. CPI in April was 8.3%, down only 0.2% from March.

　　In the past May, the Nasdaq has fallen nearly 30%.

On the 1st, the three major U.S. stock indexes opened higher and moved lower.

As of the close, the Dow fell 0.54% to 32,813.23 points; the Nasdaq fell 0.72% to 11,994.46 points; the S&P 500 fell 0.75% to 4,101.23 points.

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