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The Federal Reserve took a tough stance between inflation and recession

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The Federal Reserve took a tough stance between inflation and recession

In an interview, James D. Hamilton, a professor of economics at the University of California, San Diego, and a leading expert on the economic effects of the oil shock, said they “have been a major contributor to recessions over several decades.” At current oil price and supply levels, the effects of the Russian war are “quite manageable for the US economy.”

But Professor Hamilton pointed out that Russia’s oil, which accounts for about 10 percent of world production, may not be easily replaced if completely cut off – an outcome he sees unlikely. Nevertheless, the loss of a large part of it may also have been an oil price shock compared to the 1970s.

In addition, cutting down on the availability of Russian commodities such as palladium, which is important for catalytic converters in gasoline-fueled cars, and nickel, which is used for car batteries and many other purposes, also amount to shock supplies. Is.

How serious is the threat that these war-related issues will cause major economic problems in the United States? “We have to watch it carefully,” said Professor Hamilton.

Another variable for the Fed to consider: Global supply chain problems, which have contributed to inflation in the United States, could be made much worse by the worst outbreak of COVID-19 in China since early 2020. Lockdowns and restrictions are already slowing down in China. Toyota and Volkswagen supplied products such as cars and Apple iPhones, as well as components such as circuit boards and computer cables, as Keith Bradsher reported from Beijing for The New York Times.

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“The situation in China certainly complicates things for the Fed,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management in the United States. “It adds a level of delicacy to the mix here, and one that’s so hard to predict.

“It was already a challenging environment,” he said. “Remember, in the markets, we started in the good old days in January worrying about what the Fed would do about interest rates.”

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