Source: Jinshi Data

Former Federal Reserve Chairman Bernanke said last Saturday that the economic policies formulated by the incoming Trump administration would not lead to fundamental changes in inflation.

Bernanke mentioned in the discussion: "I agree that regardless of the merits of Trump's policies in public finances, their impact on the inflation rate may be limited."

Bernanke indicated that the tax cuts in 2017 have already been largely implemented, and changes in immigration policy are a slow and uncertain process that will not have a significant impact on the overall economy. However, he added that the crackdown on illegal immigration combined with import tariffs may pose some issues for certain industries such as construction and Agriculture.

Bernanke pointed out that it is difficult to predict the specific effects of tariff policy because it is unclear how Trump intends to use tariffs as a negotiating tool or whether he plans to keep these tariffs permanently, and how large the tariffs will be. He also mentioned that import tariffs can reduce output and raise inflation, which may offset each other, leading the Federal Reserve not to react significantly.

Bernanke stated, "Unless there are some very unusual circumstances, including geopolitical risks, it seems unlikely to truly have a fundamental impact on the path of inflation."

Assumptions about Trump's policies have become a key factor in the Federal Reserve's policy formulation. In last month's policy meeting, the Federal Reserve projected only two rate cuts of 25 basis points this year, which is a reduction by half compared to the expectations from September last year.

Tim Duy, chief economist at SGH Macro Advisors, stated that the Federal Reserve is determined to maintain the MMF policy until the uncertainty surrounding Trump's economic plan diminishes.

In the same panel discussion, former senior economist for the Obama administration, Christina Romer, expressed a similar view, believing that extending tax cuts, new import tariffs, and restricting immigration would drive up inflation, "at least a slight increase."

Romer believes that the annual inflation rate "seems somewhat stagnant" at 2.5%, above the Federal Reserve's 2% target, saying, "It is always a bit too high."

Harvard economist Jason Furman also agrees that the impact of Trump's policies on inflation is relatively small, at around three to four percentage points.

However, if the inflation rate reaches 2.9% annually, then an additional few percentage points of inflation could determine whether the Federal Reserve raises rates, stays put, or cuts rates. Romer also warned that any actions by Trump that undermine the Federal Reserve's independence "are worrisome things" that could lead to soaring inflation.

Bernanke stated that the Federal Reserve's communication is no longer just about explaining its policy plans to the Bonds market, but also needs to secure support from Congress and the public for its policies. "They must explain why they are taking these actions, and also explain that losing independence would be a very bad thing from their perspective because it would affect both inflation and the markets."

Bernanke personally believes that inflation pressures in the USA will ease in the coming months. He said, "My personal view is that we have not yet seen all supply shock factors fully reverse, such as rent and forward-looking factors like Autos Insurance, so I believe inflation will improve in the future and will not impose significant economic costs."

Bernanke added, "This is my best guess."

编辑/jayden