In June, the CPI reached a new high, and the US economy has fallen into "quasi -stagnation"

Cai Tongjuan Researcher and Deputy Director of the Macro Research Department of Renmin University of China

After the United States announced the June CPI data, the public began to worry about whether the US economy was going towards decline or even "stagflation", and further care about what a negative impact of the "stagnation" of the US economy will have on the world economy. So, what is "stagflation"? What are the criteria for stagnation?

Is the US economy going to "stagnation"?

Bland Chad, an internationally renowned macroeconomicist, gave two definitions of "stagflation" through summarizing the literature: the first is the lower output growth rate (even decline) and higher inflation; the second type It is a higher unemployment rate and high inflation. The first definition is currently commonly used.

Taking the most classic capitalist countries' "stagnation" from 1973-1975 as an example, the "stagnation" of the US economy exists in the following facts: Before the "stagflation" occurred, the expansion monetary policy effectively stimulated the output growth and reduced the unemployment rate; the United States; the United States Expansion monetary policy has caused central banks in various countries to launch loose monetary policies, resulting in rapid inflation worldwide; the level of inflation continues to be higher than 8%, and the output continues to grow; "high inflation" and "low growth (even decline) "It lasts two years.

Judging from the above standards, the current US economic situation has conforms to the top three.

First, before the "stagnation" signs appeared in the first half of this year, shortly after the outbreak of the new crown pneumonia in 2020, the United States quickly launched a zero -interest rate plus unlimited and loose policy. The total scale reaches 63 trillion US dollars, with great strength and frequency, and it is rare in history. Expansion monetary policy has indeed stimulated output growth and reduced the unemployment rate. The US economic growth rate increased from -3.5%in 2020 to 5.6%in 2021, and the unemployment rate also decreased from 11.1%in June 2020 to this year 3.6%in March.

Second, the US expansion monetary policy has caused major developed countries such as Europe and Japan to scramble to launch a loose monetary policy: the Central Bank of Europe launched a total of 1.35 trillion euros of emergency resistance to debt purchase (PEPP) in March 2020, PEPP, In December, it added 500 billion euros to maintain interest rates -0.5%to this day. In March 2020, the Bank of England reduced the benchmark interest rate to a historical low of 0.1%, and expanded the scale of asset purchases of corporate and government bonds three times during the year. ; The Japanese government launched a large -scale economic stimulus plan twice in April and May 2020, with a total scale of more than 23.0 trillion yen. After two years of large water irrigation, the global economy has begun to experience rapid inflation in Russia and Ukraine's conflict and US Western sanctions this year.

Third, the level of inflation in the United States has lasted 4 months higher than 8%, and the output lasted for 6 months to grow negative or zero growth. Among them, the first quarter increased by -1.6%, and the expected increase in the second quarter Turning on the verge of recession. The fourth standard, that is, "high inflation" and "low growth (even decline)" last two years, need to be observed for a longer period of time. If you put aside the fourth standard, it can also be said that the US economy has entered the "quasi -stagflation" stage in the first half of this year.

Since March this year, the Fed has raised interest rates three times, and on June 16, it has raised interest rate hikes 75 basis points on the basis of the first two interest rate hikes. However 9.1%of historical highs. In order to reduce inflation, the Fed may take more tough measures. However, in the second quarter, the US economic growth rate has been close to zero. The US economy has actually fallen into a dangerous situation of recession and inflation. The "Walker Moment" of the year has accelerated.

What impact will the US "stagnation" on the world economy?

Faced with the risk of "stagflation", the Federal Reserve is likely to continue to adopt a radical tightening monetary policy to reduce the level of inflation. Serious impact.

First of all, as the world's largest economy, which accounts for 25%of the world economy, the economic growth of the US economic growth has stagnated or even declined, which will lead to a decline in the U.S. economy's stagnation of the world economic growth. From the perspective of trade channels, the purchasing power of the United States in the world will also decline As a result of export -oriented economic growth, an export -oriented economy growth is expected to decline.

Secondly, the Fed's interest rate hike policy will attract global capital to return to the United States. While supporting the US dollar exchange rate, it will cause capital outflow pressure to other economies, especially for developing countries with fragile economic fundamentals.

Third, the increase in interest in the US dollar will put pressure on the global bond market, leading to an increase in interest rates in sovereign debt in various countries, increased debt burden, and even triggering a global debt crisis.

To avoid repeating the mistakes of the 1970s, the global economy must reduce the uncertainty of the continuous turbulence of the global commodity prices, reduce the risk of trade protectionism and geopolitical conflicts, and continue to play the role of economic globalization in reducing the level of price. Only when the global commodity price, epidemic and human conflict are resolved, the monetary policy can more effectively anchor inflation expectations, achieve the effect of controlling inflation, avoid economic "hard landing", reduce "stagnation" worldwide "stagnation" "stagnation" " risks of.

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