[Epoch Times, June 18, 2021](Epoch Times reporter Linda Jiang reported in Los Angeles) The Federal Reserve (Federal Reserve) sharply raised its expectations for inflation on Wednesday (June 16) and decided to keep interest rates unchanged for the time being, but Released a signal to raise interest rates early. As soon as the news came out, the US stock market fell. Economists hope that the Federal Reserve will take positive actions as soon as possible to curb the rapid growth of inflation and even the possibility of economic recession.
The Fed said on Wednesday that it will maintain the current ultra-low interest rates. But with signs of rapid economic recovery and a surge in inflation, officials said that interest rate hikes could come as early as 2023. They had previously said that interest rates will not be raised until at least 2024.
William Yu, an economist at the Anderson School of Management at the University of Los Angeles (UCLA), believes that rising interest rates are indeed the best way to effectively control inflation, and that timing is extremely important.
He said that if you refer to the Fed’s policy on raising interest rates in the past, “sometimes the interest rate rises too late, and the result is that the interest rate rises too late, but this will suddenly cause an economic recession.”
In order to avoid a financial crisis, he believes that the Fed can raise interest rates as soon as possible, so that the market has a buffer room and tighten excessive excess funds. “Many people hate interest rate adjustment, but sometimes interest rate adjustment is a necessary strategy. Don’t let the market overheat.”
In particular, the entire U.S. market is currently too rich in funds and interest rates are low. He said: “This money can go to a lot of places. It will (cause) inflation if it goes to general goods, cars, tourism services, etc.; if it takes general assets, For example, in the real estate and stock markets, there may be asset bubbles.”
In the past few months, Yu Weixiong introduced that when economists are closely watching inflation trends, two different attitudes have emerged. One school of economists is more optimistic, believing that the current inflation is only temporary.
“Mainly because our current annual inflation rate is compared to last year’s base period, May was last May, and April was April last year. Those two months (last year) happened to be the most affected by the epidemic. In severe cases, the base period was a bit low at that time.”
Other economists are optimistic about the signs that the Biden administration passed the US$1.9 trillion rescue plan at the beginning of the year, which may cause excessive capital to flow into the market and increase inflation.
But from a personal perspective, Yu Weixiong believes that the current market is overheated. “It has now been two consecutive months (April and May), and the annual growth rate of inflation has been higher than 4.5%. This is a very high number and can be said to be the highest value since the financial turmoil. I think the evidence has begun to appear. So we have to be very cautious.”
Fed officials have repeatedly stated that they believe consumer cost increases are “temporary” and expect inflation to eventually fall back to the 2% target level set by the central bank.
However, according to statistics from the Department of Labor, the annual growth rate of the US “Core Consumer Price Index” (CPI) in May reached 3.8%. In April, the consumer price inflation rate soared to 4.2%, the fastest growth rate in 13 years. Some economists worry that all kinds of data reflect the severity of the current inflation situation.
“Even in 2008, we did not see such a high number.” Yu Weixiong said: “Our prediction is the most critical for the next one or two months. If the next month (annual growth rate of inflation) is very High, we hope the Fed can take some positive actions, such as adjusting interest rates.”◇#
Editor in charge: Li Xin