PODCAST Inflation hit but not yet under control

_____

This divergence is explained by the widening growth gap between the two zones. Europe is almost at a standstill with Germany in recession while in the United States the forecast has been raised to 2.1% for this year.

This situation has an impact on the American presidential campaign

The two adversaries, Trump and Biden, are neck and neck, and inevitably, this will weigh, because consumer morale is in free fall. “It’s the economy stupid”… You know this famous formula attributed to an advisor to President Clinton who explained his victory by the good health of growth in the United States. This time, the risk is that the possible defeat of (Joe) Biden will be blamed on this persistent inflation.

The Trump camp is exploiting this loophole to the fullest, speaking of “ Bidenflation » where the Democrats praise the successes of “ Bidenomics »: in fact, the labor market is at full employment with 4% unemployment, massive subsidies to green industries have made it possible to reindustrialize the country, particularly, to top it all, in Trumpist states like Texas.

But it was very expensive, close to $1,000 billion, which increased the American debt and caused the economy to overheat.

The American president realized the danger. He has just announced emergency measures to lower the prices of medicines and rents for the most modest. But it is above all in the shopping carts that the battle is being played out while the price of eggs, the temple of breakfast made in America, has doubled. Biden is therefore putting pressure on large distribution companies which, according to him, are making record profits on the backs of consumers.

The Fed, the American central bank, should only start lowering rates in the fall, or even at the end of the year.

However, American households are extremely sensitive to the level of rates, whether for consumption or for their real estate purchases. The fate of the election is therefore somewhat in the hands of Joe Powell, the head of the Federal Reserve.
What is now certain is that interest rates will fall first in Europe. The governor of the Bank of France announced yesterday on this channel a first reduction on June 6. In the United States, this will happen later, if and only if inflation really calms down.
However, new clouds are appearing: an escalation of the conflict between Israel and Iran could set the region ablaze and revive inflation throughout the world via a new oil shock.