Oriental Network·Zongxiang News Reporter Cheng Jing
During the reign of Trump , the Fed's life was not easy.
Trump "urged" the Fed to cut interest rates more than once in the middle of the night. If the opponent does not "follow the order", he will also be labeled as "enemy". But since Trump left office, the Federal Reserve and White House seem to have gradually stood on the same front. But some economists warn that another risk is brewing under this harmonious cooperation.
On February 27, the U.S. House of Representatives passed the $1.9 trillion economic stimulus plan proposed by President Biden with a slight advantage of 219 votes to 212, and handed it over to the Senate . The program includes direct financial aid and financial aid for COVID-19 vaccines and testing. If the plan is finally passed, many Americans will receive a check of $1,400 directly.
, a policy that the outside world regards as a continuation of "flooding", has aroused inflation expectations. Some economists warn that demand for social rebound after the unblocking could push up consumer prices as many Americans accumulate a savings during the COVID-19 pandemic. However, Fed officials tend to "bet" and believe that this price increase is one-time rather than sustained.
(Photo says: Federal Reserve Chairman Powell. Photo/Reuters)
Federal Reserve Chairman Powell said at a congressional hearing last week that there is "no need to worry about inflation" at present, because the U.S. job market will take a long time to recover.
, formerly chairman of the Federal Reserve and current Treasury Secretary, Yellen also said that he hopes that members of Congress will "focus on the big picture" to help economic recovery.
, headquartered in , Washington , is part of the U.S. federal government, but its membership has a term of 14 years, longer than any president, and operates independently of the White House. Its legal mission is to stabilize prices and ensure full employment for the people. Since Volcker served as chairman in the 1970s and 1980s, curbing inflation has become the cornerstone of the Federal Reserve's economic policies.
During Trump's administration, the president and Fed Chairman Powell were always "tit-for-tat". Trump has repeatedly tweeted late at night to ask the Federal Reserve to cut interest rates to increase economic liquidity, but Powell, who has withstood the pressure from Trump, is called the "enemy." The Washington Post pointed out that because Powell is now deeply trusted by the Biden administration, he is becoming more and more careful in evaluating the economic stimulus package and is increasingly less open to calling for financial aid, which is completely contrary to the Trump era.
At the same time, Powell has publicly talked about increasing government spending many times and provided economic foundations : In early February, Powell said that US prices will have upward pressure this year, but "the expected scale will not be large and will not continue"; in testimony at the Senate Banking Committee last week, he said that a one-time surge in fiscal spending will not change the driving force that triggers inflation.
And Powell's words have been cited by Biden cabinet officials and Democrats many times, "endorsing" economic stimulus policies.
UA Microeconomics economist Dui believes that the "one song and one harmony" between Powell and Yellen and other Treasury officials was intentional, and the purpose was to "send the US economy to heaven."
(Picture: US President Biden (left) and Treasury Secretary Yellen. Photo/AP)
The Washington Post pointed out that if Yellen and Powell's expectations are correct, the US economy will enter the "blond girl era" - meaning high growth, low unemployment, low inflation, and low interest rates, which are the best and most moderate periods of the economic cycle; but if the judgment is wrong, the US economy may enter a cycle of inflation, high interest rates and high debt.
Last week, U.S. Treasury yields and interest rates surged as markets expected the economy to recover quickly within a few months. The 10-year U.S. Treasury yield closed at 1.41% last week, up 55% so far this year, nearing a 52-week high. But Wall Street is concerned that bond yields are caused by inflation , rather than a temporary surge in demand related to the economic recovery.
Goldman Sachs Recently, it is expected that the U.S. economic growth rate may reach 7% this year, the highest growth rate since the Reagan period.As the U.S. economy has been in a slow growth rate for the past 20 years, this year's "intensive growth" is seen as an excellent opportunity to break through the economic growth rate. However, former U.S. Treasury Secretary and Harvard Economics Professor Sanmers had previously warned that if the economic recovery is overheated, a new recession may begin.
Sanmers is one of the economists against the "big-win" economic stimulus plan. A report by the Responsible Federal Budget Committee (CRFB) that he and his colleagues often quoted pointed out that the economic stimulus plan may bring the U.S. economy to development expectations, but once the plan goes awry, it will lead to inflation that has not been experienced in forty years. Inflation will force the Fed to raise interest rates, curb the pace of economic recovery, and increase the cost of repaying growing Treasury bonds.
