A man shops at a supermarket in Foster City in California, the United States, April 12, 2022. [Photo/Xinhua]
The US Federal Reserve recently raised its benchmark interest rate by half a percentage point, shifting the target range to 0.75 percent to 1 percent, following a smaller increase in March. It was the Fed's biggest increase in 22 years.
Last fall, Fed Chairman Jerome Powell said rising prices were "transitionary" and would not leave "a permanent mark in the form of higher inflation". So, when inflation began to climb up after mid-2021, the Fed ignored it until it soared.
In March, the inflation rate in the United States accelerated to 8.5 percent, the highest since December 1981. It was partly fueled by rising energy and food prices, and the consumer price index, which shot to 6.5 percent, the most in four decades.
Typically, the rapidly increasing energy and food prices are being attributed to the Russia-Ukraine conflict. Effectively, they should be associated with economic sanctions which have turned a regional conflict with a limited, short-term trajectory into a global crisis with a broad, protracted horizon. That's the net effect of the hybrid proxy war in Ukraine.
Excluding volatile energy and food categories, the soaring inflation has been associated with pandemic-induced global supply disruptions and the recent COVID-19 outbreaks in China. New cases peaked in China in late April and are now coming down.
But disruptions in the global supply chains may penalize global economic prospects as long as the failed efforts to contain the virus in the West continue to give rise to new waves of variants.
Commodity prices peaked in early March, remain close to the peak level and have soared 39 percent since the beginning of the year. Food prices climbed to an all-time high in March, up nearly 20 percent year-on-year, and remain high in what UN Secretary-General Antonio Guterres has called the "hurricane of hunger and a meltdown of the global food system", while crude oil price reached a high of $125 per barrel in early March, increasing 43 percent since January.
In Europe, the most exposed region to Russian energy, natural gas price quintupled to a high of 230 euros ($239.04) per megawatt-hour and has dropped to 104 euros, as concerns over Russian supplies have dissipated somewhat, but only temporarily.
Russia is the world's 11th largest economy with GDP of $1.8 trillion. It is the world's largest gas exporter and the second-largest crude oil exporter, and given its key role in global energy supply, Goldman Sachs has warned that the global economy "could soon be faced with one of the largest energy supply shocks ever".
A benign scenario in the Ukraine crisis was possible, but it would have required rapid, proactive diplomacy. Unfortunately, that has not been the priority of the proxy war. As US Defense Secretary Lloyd Austin said in late April: "We want to see Russia weakened." It was a stunning admission.
The Biden administration is reviewing the excess tariffs imposed on Chinese products ahead of their expiration in July. In fact, some policymakers are calling for reductions in the tariffs in order to provide relief to American consumers struggling with rising prices. These calls are fueled by the fear of a potential Republican landslide win in the midterm elections.
The US' misguided trade wars against China and other large economies have caused irreparable harm to the world economy, by undermining global recovery since 2017. Currently, average tariffs on Chinese imports are levied around 19.3 percent and cover more than two-thirds of all goods the US buys from China.
Yet the US trade deficit has not shrunk, as the Donald Trump and Joe Biden administrations expected. In March, it widened sharply to a record high of $110 billion, due to a broad-based rise in prices, especially as energy imports increased by 10.3 percent to a record high of $352 billion.
The lessons are unambiguous. Unilateral tariffs can resolve neither multilateral challenges nor distortions in the US domestic economy. In effect, recent research suggests that a trade liberalization policy equivalent to a 2-percentage-point reduction in tariffs could reduce US inflation by 1.3 percentage points from the current rate.
However, the Biden administration's priorities have been geopolitical rather than economic. That's precisely why it has continued with Trump's tariffs since January 2021. But, ironically, hoping to kill two birds with one stone, the Biden administration now blames "Trump's tariffs" for the record high inflation. In a disingenuous face-saving measure, the incumbent administration hopes to reframe its economic failures to derail Republican advances in the impending midterm elections.
"Has US inflation peaked?" The New York Times asked several weeks ago. "Has US inflation finally started to slow?" seconded the Financial Times more recently. Recent headlines reflect optimistic but premature hopes that inflation peaked in March.
Yet the Ukraine crisis is far from over, thanks to Biden's proxy war. Moreover, the bottlenecks in the global supply chains are yet to be cleared and could again clog supplies with the emergence of new novel coronavirus variants.
These pressures are likely to weigh on commodity prices longer, particularly if the Biden administration opts for new, ill-advised trade wars and continued misguided sanctions.
Meanwhile, the Fed's aggressive and belated rate hikes are escalating economic challenges in the US and elsewhere. And these could worsen in July, when the Fed plans to start quantitative tightening by culling assets from its $9 trillion balance sheet.
The author is the founder of Difference Group and has served at India, China and America Institute (US), the Shanghai Institutes for International Studies (China), and the EU Centre (Singapore). The views don't necessarily reflect those of China Daily.
,40-year-high US inflat全球高考txt ion self-inflicted相关：
深圳前海出台新规：与港合拍影视剧最高可获300万元撑持 中新社深圳5月16日电 (郑小红 朱族英)深圳市前海管理局16日发布消息称，《深圳前海深港现代服务业合作区专业服务业发展专项资金管理暂行办法》(简称《办法》)正式出台，共推出三章十三条具体支持措施。其中，在文创产业方面，由前海企业作为制作方的香港与内地合拍影视剧，最高可给予300万元(人民币，下同)支持。 《办法》所覆盖的行业范围包括会计、评估、咨询、工程服务、文化创意、会展、人力资源、知识产权服务..
守“沪”日志：直击上海分阶段推进复商复市 (抗击新冠肺炎)守“沪”日志：直击上海分阶段推进复商复市 中新社上海5月16日电 (姜煜 刘晓 陈聪瑶)经过两个月的闭店后，位于南京路步行街的上海第一百货商店16日晚亮起了灯，工作人员正在为重新开业做准备。 根据安排，上海按照“有序放开、有限流动、有效管控、分类管理”原则，16日起分阶段推进复商复市。 “我们这几天每天都会对商场进行3次消毒，正式开业后消毒次数会增加到每天5次”，第一百货商业..
第19届世界中学生行为会在法国诺曼底揭幕 中国代表团亮相新华社法国多维尔5月15日电（记者肖亚卓）由国际中学生体育联合会主办的第19届世界中学生运动会15日在法国诺曼底大区的海滨城市多维尔开幕，包括中国在内的63个国家和地区的近3500名运动员将在接下来的一周时间里，参与田径、游泳等20个项目的角逐。中国代表团在开幕式活动中。新华社记者肖亚卓摄当天的开幕式在多维尔海边的国际中心举行，组委会别出心裁地设计了一次参赛队伍的“刷街”游行。“今天开幕式的氛围真的非常好，让..
普京：芬兰瑞典插手北约不会带来威胁 但俄方将做出回应俄罗斯总统普京表示，俄罗斯与芬兰和瑞典之间并不存在问题，上述两国加入北约不会带来威胁，但俄方将做出回应。当时时间5月16日，普京在集安组织成员国领导人峰会上称：“至于（北约——编注）扩张，以纳入包括芬兰和瑞典两国新成员。我想通告您们的是，尊敬的同仁，俄罗斯和这两个国家间没有问题。因此，从这个意义上说，通过这些国家加入的扩张并不会对俄罗斯构成直接威胁，但是将军事基础设施扩展到这些国家会引起我们的回应..
Slow initial response leads US to somber milestoneA man wearing a protective face mask sleeps on a subway train in New York City, US, May 6, 2022. [Photo/Agencies]Country that rejected overseas aid in COVID fight hits million case markAs the United States marked the somber milestone of 1 million people in the country killed by COVID-19, it looked back at what had caused the deaths of mo..
Making the Statue of Liberty Cry
40-year-high US inflation self-inflictedA man shops at a supermarket in Foster City in California, the United States, April 12, 2022. [Photo/Xinhua]The US Federal Reserve recently raised its benchmark interest rate by half a percentage point, shifting the target range to 0.75 percent to 1 percent, following a smaller increase in March. It was the Fed's biggest increase in 22 year..
初步考虑天津本轮疫情与污染的进口冷链食物联系关系 新华社天津5月16日电(记者白佳丽、张建新)记者从16日第183场天津市新型冠状病毒肺炎疫情防控工作新闻发布会上获悉，初步考虑天津本轮疫情与污染的进口冷链食品关联。 天津市政府副秘书长、市卫生健康委主任顾清介绍，截至5月16日18时，天津本轮本土疫情累计发现新冠病毒感染者28例，其中，天津市北辰区18例，东丽区10例。此轮疫情发生后，天津市迅速集结市级流调溯源队伍派驻涉疫地区开展应急处置。截至5月16日18时，追..
天津新增4例阳性传染者涉及首要区域和场所发布 中新网天津5月16日电 (杨子炀 孙玲玲)记者从天津市疫情防控指挥部获悉，经多方流调，2022年5月15日新增的4例阳性感染者的活动轨迹基本确定，其中涉及到的主要区域和场所予以公布。 天津市疾控部门提醒，与发布病例轨迹有交集人员，请立即主动向社区、单位或辖区疾控部门报告，配合做好集中隔离、居家隔离、健康监测、核酸检测等各项防控措施。 5月10日8:00-8:15北辰区小淀镇刘安庄村天津市芝霖药店 5月10日..
16日12时至18时天津新增2例阳性传染者详情发布 中新网天津5月16日电 (杨子炀)记者刚刚从天津市防控指挥部获悉，5月16日12时至18时，天津市疾控部门报告2名本土新冠病毒核酸检测阳性感染者，已转运至市定点医院，其中新冠肺炎确诊病例1例(轻型)，新冠病毒无症状感染者1例，均为管控人员筛查发现。 现将5月16日12时至18时，新增的阳性感染者详情公布如下： 阳性感染者1，女，46岁，居住于天津市北辰区小淀镇，系管控人员筛查发现，5月16日采集咽拭子，经检测中..