“Dollar hegemony threatens the world economy”

U.S. inflation has cooled slightly after rising three times this year, led by falling food and auto prices.

Data released by the U.S. Bureau of Labor Statistics on the 15th local time showed that the U.S. consumer price index increased by 0.3% month-on-month in April, slightly lower than the 0.4% in March; the year-on-year increase before seasonal adjustment was 3.4%, slightly lower than in April last year. 3.5%.

Screenshots of reports from Consumer News and Business Channel in the United States

However, prices remained high in April, and millions of Americans continued to feel the pressure of rising prices.

A survey released by the University of Michigan last week showed that as inflation and interest rates are expected to remain high, putting pressure on daily budgets of American households, the consumer confidence index fell sharply in May, and Americans believe that the outlook is bleak.

University of Michigan official website: After being almost flat for three consecutive months, the consumer confidence index fell by about 13% from the previous month to the lowest level in about half a year.

As Fed Chairman Powell said, consumer confidence is low because even if price growth slows down, commodity prices are still high. People's intuitive feeling is, "The prices of everything I buy have not dropped."

Analysts believe that rising housing and fuel prices were the two biggest factors driving price increases in April.

The U.S. Bureau of Labor Statistics reports that the two indexes combined contributed more than 70% to the overall index growth.

The British "Guardian" reported that the pressure brought by rising prices on households across the United States has become a key trigger for the November presidential election.

The report also stated that a series of polls show that the economy is the top concern of voters, and many Americans question President Biden's handling of economic issues.

After the outbreak of the COVID-19 epidemic, in order to save the economic decline caused by its own inability to fight the epidemic and policy mistakes, the United States relied on the hegemony of the US dollar to "print" and "spread money" aggressively, pushing the country's inflation level to a peak not seen in 40 years.

After missing the best opportunity to reduce inflation, the Federal Reserve unilaterally and aggressively raised interest rates to the highest level in more than 20 years.

After 11 interest rate hikes, inflation has indeed declined, but is still above the target and has rebounded again this year.

AP: Inflation was unexpectedly high again in the first three months of the year, raising concerns that prices could surge again.

As a result, the Federal Reserve, which originally said it might cut interest rates starting in June, changed its mind.

The Federal Reserve decided to keep the federal funds rate target range unchanged after its latest interest rate meeting that ended at the beginning of this month. This is the sixth consecutive time since September last year that the Federal Reserve has decided to keep interest rates unchanged at a 23-year high.

Now that inflation fell slightly in April, is it possible that the Fed will cut interest rates sooner? The answer is still not optimistic.

Many US media said that although the latest economic data provided some "relief", it was not enough to change Federal Reserve officials' considerations on whether and when to start cutting interest rates.

Federal Reserve Chairman Jerome Powell said first-quarter inflation data were "higher than anyone expected" and people needed to be patient and "let restrictive policies continue to work."

Screenshots of reports from Consumer News and Business Channel in the United States

Some analysts believe the Fed is in no rush to take action.

British investment strategist James said in an interview with the Guardian that the U.S. inflation rate has been rebounding in the range of 3%-4% in the past 12 months. "This is the only factor preventing the Federal Reserve from pressing the interest rate cut button."

Threat to America's own "explosive cocktail"

Whether it was a radical increase in interest rates at the beginning or a delay in lowering interest rates now, high U.S. interest rates have made the U.S. dollar continue to strengthen, thus bringing serious negative spillover effects to the world economy.

Recently, as market expectations for the Federal Reserve to lower interest rates in the short term have cooled, the exchange rates of many currencies against the US dollar have continued to fall, and the currencies of developed countries such as the Japanese yen, the euro, and the Canadian dollar have depreciated.

Since the vast majority of foreign exchange transactions involve the U.S. dollar, a stronger U.S. dollar significantly increases the cost of importing U.S. dollar-denominated goods to other countries and regions.

A recent survey released by a Japanese survey agency showed that the average price increase of more than 400 foods in May this year was as high as 31%. Among them, the price increase of olive oil even reached 80%.

In the face of a strong U.S. dollar, the situation of the majority of emerging and developing economies is even more worrying, especially those economies with already heavy debt burdens.

According to the International Monetary Fund's forecast, within this year, the public debt-to-GDP ratio of Asia's emerging and middle-income economies will rise to 82.4%, a year-on-year increase of 3 percentage points; the public debt-to-GDP ratio of Asia's low-income economies will rise to 82.4%. The ratio is expected to rise by 1 percentage point to 44.6%.

In addition, globally, according to the IMF's previous assessment of 69 low-income countries, 9 of them are in "external debt distress" and another 25 countries are considered to be at "high risk of external debt distress."

An article titled "The Threat of Dollar Nationalism Shrouds the World Economy" recently published on the website of the British "Financial Times" pointed out that what is more serious than the Fed's interest rate hike is the politically driven depreciation of the US dollar.

The article stated that the U.S. dollar, with its reserve currency status, not only supports the U.S. current account deficit, but also gives the United States tremendous power. But in an increasingly multipolar world, the United States' excessive use of its sanctions weapons will erode people's confidence in the U.S. dollar and ultimately its own source of power.

The article pointed out that the BRICS countries, including Brazil, proposed "de-dollarization" not for nothing. The US interest rate hike has caused far-reaching damage to the world economy. In fact, the factor that determines the future fate of the dollar system is not the so-called external threat, but the United States' own politics and economy.

The article bluntly stated that under the successive administrations of Trump and Biden, U.S. policymakers have integrated industrial policy, trade policy, green energy and geopolitics into a powerful nationalist formula. Adding a monetary system into the mix creates a truly explosive cocktail.

Source: Global Information Radio's "Global Deep Observation"