SMM News: fears of escalating trade frictions between the world's two largest economies have triggered several upheavals in financial markets. Today, Williams, the Fed's "No. 3 figure", the permanent voting committee and chairman of the New York Fed, said today that more tariffs could boost US inflation and curb US economic growth.
We are seeing lower global growth and lower interest rates, and there is no reason to expect neutral interest rates to return to their previous normal levels in the foreseeable future, Mr Williams said. Lower neutral interest rates mean that the global "economic recovery will be slower and inflation below target", and investors see low global inflation as the "new normal" rather than an anomaly.
In addition, Williams also mentioned that the US economy is in a very good position at present, and US monetary policy is also appropriate.
Tariffs could have a significant impact on inflation
So far, no significant impact has been seen on jobs and inflation, Williams said in an interview with Bloomberg today, but more tariffs are likely to boost US inflation and curb US economic growth.
Williams noted that tariffs could have a significant impact on inflation because it could start to affect consumer prices and could raise inflation by a few percentage points next year. In addition, tariffs can have a negative impact on the supply chain.
On the same day, Eric Rosengren, chairman of the Boston Fed and FOMC in 2019, expressed a similar view, saying that if the current situation over trade tariffs continued, it could eventually drag down US economic growth and lead to higher inflation in the United States.
On the evening of Monday, May 13, Beijing time, the tariff Commission of the State Council issued a notice saying that on May 9, 2019, the United States Government announced that with effect from May 10, 2019, The tariff rate on $200 billion of listed goods imported from China has been raised from 10 per cent to 25 per cent. In order to defend the multilateral trading system and defend its legitimate rights and interests, China has to adjust and impose tariffs on some imports originating in the United States:
With effect from 0: 00 on June 1, 2019, tariffs have been imposed on some of the US goods on the $60 billion list, with tariffs of 25 per cent, 20 per cent or 10 per cent, respectively. A tariff of 5 per cent will continue to be imposed on goods subject to the previous 5 per cent tariff.
Fed monetary policy is timely global economic recovery will be slow and inflation will be below target
Williams also said in the same interview that the US economy is in a very good position, the unemployment rate is at a historically low level, and consumer and business confidence is recovering. Us monetary policy is just right, and the US economy will be able to meet the challenges well.
On the same day, speaking at an event organized by the SNB and the International Monetary Fund (IMF) in Zurich, Williams said: we are ushering in a trend of low global growth and low interest rates. Monetary policymakers rethink how to achieve a strong economy in an era of low interest rates.
Longer life expectancy and slower population and productivity growth will slow global economic growth and lower interest rates, Mr Williams said. Specifically, lower growth has led to a reduction in investment, an ageing population in developed countries has led to an increase in savings, and lower demand and higher savings have led to a decline in the neutral level of global interest rates. This will not limit economic development, nor will it heat up the economy.
These factors keep interest rates close to zero, a level that leaves them unable to cope with the recession. If the economy slows in the future, the room for central banks to cut interest rates will be limited. As a result, lower neutral interest rates mean that the global "economic recovery will be slower and inflation will be below target".
Williams also said that in the absence of demographic changes, or scientific or technological breakthroughs, there is no reason to expect neutral interest rates to return to normal levels in the foreseeable future. Investors see low global inflation as the "new normal" rather than an anomaly.