Today the so-called “core Consumer Price Index” data for June were released, reportedly giving a 4.1% “core” inflation rate for the past year. On July 26, Federal Reserve Chair Jerome Powell told the media that the “fight against inflation still has a long way to go.” The meaningless statement was clearly intended to give the Federal Open Market Committee (FOMC) cover for further rate increases, and it points to other purposes than “fighting inflation.”
China’s Global Times, in an editorial-like article, today criticized the little-mentioned interest-rate and exchange rate warfare of the Fed. With the clear title, “Relentless U.S. Rate Hikes Hurt Other Economies, Disrupt Global Order: Experts,” the piece quotes Chinese Digital Real Economies Integration Forum official Hu Qimu, who said that the Fed strategy has disrupted international trade, many other economies, and the financial system.
The paper paraphrases Hu: “The U.S. is getting used to shifting its economic woes to other countries through its rate-hiking cycles, as the process always draws capital into the U.S. and causes troubles for the emerging markets.” Since U.S. rates have remained high for some time, and the probability of a rate cut this year is low, emerging market economies, especially the heavily indebted poor ones, face mounting pressure from capital outflows, currency depreciation and rising debt servicing costs.
“In addition, weak consumer demand in the U.S. is negative for other economies [read: China’s included] that have become dependent on exports, which means production cuts.”
It adds that U.S. imports in May were 2.3% down from May 2022, and notes the case of Vietnam, whose exports to America are down 25% year on year. (https://www.globaltimes.cn/page/202307/1295183.shtml)
