US Treasury Secretary Janet Yellen said interest rates may need to rise modestly to prevent the US economy from overheating due to high government spending, but did not set a time frame. Later, she would have been annoyed by the market reflection that pulled the stocks down and valued the dollar, so she tried to get back what she said. While the first statement was in the form of a signal for an increase in interest rates, the second explanation was that there was no such suggestion or guidance. Communication is important, and it needs to be done in the right place at the right time.
Everyone will remember the conflict with the Fed under Trump. Once again, we see that the government and Central Bank perspectives differ. Yellen actually managed the process by establishing a good communication for the policy transition during the 2013 model tapering period, but she is now on the side of the government. In other words, the title of the Central Bank has changed with the title of the Ministry of Treasury, and let’s not forget that the institutions are talking, not the people. Central Bank criticism or direction was exceptional under Trump, and normally it is unusual for a cabinet member to comment directly on the Fed.
The situation in inflation is very controversial. It is necessary to look at the inflation, which we touched on the demand channel yesterday, from the cost channel once again. We said that the demand effect will fade over time and “the main effect will return when old spending habits return”. This requires further employment improvement. The effect of increasing costs may continue; because there is a serious supply shortage in the world right now. Supply-driven troubles may trigger further increases in commodity prices supported by the previously improved global economy and demand channel. Especially the problems in the supply of chips, rubber and timber will cause many manufacturers to increase prices. In the manufacturing industry, price hikes in many goods groups, especially automotive, steel manufacturers, electronics and technology, may have a cost-driven effect on inflation. In the US, inflation will likely come to somewhere around 3%.
The recovery situation in the economy also continues. It is normal for the Fed to stand by, but the pressure is growing and tapering communication in the summer has become the base scenario.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
