It feels like inflation is an issue again. The U.S. consumer price index has bounced back and hit 3%. The month-on-month increase is at 0.5%. Excluding energy and food prices, the core consumer price index is also on the rise once again… Super-core inflation, excluding rent in the core indicators, also rose sharply. In particular, the rise in used car prices and insurance premiums was noticeable… I think that if there are broad tariffs on steel and automobiles, the price of automobiles will go up more.

Yeah. The reason why the Consumer Price Index is coming up a little differently is because of the recently released expected inflation. It’s creeping up, with one-year expected inflation hitting 4.3%, and five-year expected inflation hitting 3.3%. And these inflation expectations, you could say, come from Trump’s tariffs. Consumption in the U.S. exploded late last year, and one compelling analysis of why is that reflected concerns that Trump’s tariffs would cause prices to go up. In the paragraph above, I said that with the prices of used cars going up, these could go up even more in the future when the tariffs are widely imposed. Yeah. These expectations… Stimulating expectations for inflation is going to be a very important issue right now. It’s kind of like… From the first Trump administration, who lived in a world without inflation for more than 10 years… Now that I haven’t been able to catch inflation for four years, I’m struggling… People will think differently about inflation, especially the news about tariffs.

If inflation becomes an issue… How should the Fed and the U.S. administration act? If the Fed responds to this kind of inflation in a tepid way, it could lead to inflation once again. It could be a mistake reminiscent of the “temporary” shock of 2021. Powell’s testimony to Congress the day before also mentioned the mistakes of 21 years. And I remember last week when the Fed dovish Goolsbee said, “We need to be cautious,” talking about 21 years. Yes, the Fed’s rate cut… could slow it down even further. And we could even think about raising the benchmark interest rate if we get a couple of times of this kind of inflationary pressure. And Goolsbee, who was surprised by the inflation data the day before, hinted at the situation indirectly, and former Treasury Secretary Summers is explicitly saying that the possibility of raising interest rates should be left open.

This is the YEONJUN vibe… They’re not talking about inflation in particular yet. But they’re still trying to impose mutual tariffs even in this situation. Won’t they stimulate inflation? So last week, Treasury Secretary Bessent said he was paying attention to a 10-year interest rate, and he said he would tap it by easing regulations on finance and lowering energy prices. And to get energy prices down, shale companies in the U.S. need to produce oil at record levels. And that’s not easy to do in the short term. Should we ask Middle Eastern countries to increase oil production… Perhaps that’s why the U.S., which has been trying to get out of the Middle East, has been frequently talking about issues related to the Middle East recently. And Trump is trying to quickly end the Russia-Ukraine war through a phone call with Putin. And if this war ends, maybe there’s a chance that energy supply will increase again. So what Bessent is talking about? Stabilizing inflation from falling energy prices… It’s just a large-scale imposition of tariffs, and wouldn’t it be possible to achieve it.

There’s also a change in financial regulations. Michael Barr in December… And the vice chairman of financial regulators has resigned. It’s still a vacancy. There seems to be a lot of comments about who should fill it in. And one of them is Michelle Bowman, the hawkish member of the Fed. She was the one who opposed the key rate cut last year. And she’s still very wary of inflation, giving the nuance that there’s no need for further rate cuts. But she’s hawkish when it comes to central banks, but she needs to ease restrictions on commercial banks. And I think that’s quite positive about the SLR deregulation that I’ve been talking about over and over again. And I think we need to deal with this separately. The liquidity provider for the market is not the central bank distributing blind money to everyone, but the idea is that commercial banks should evaluate the creditworthiness and growth potential of the other party and supply them selectively. And that would require the deregulation of commercial banks. And what’s interesting is that if commercial banks are deregulated, they could increase lending, but they could also increase their purchases of government bonds. And that could curb the uptick in interest rates on government bonds. Yes. If inflation is this strong, Trump will also feel burdened by tariffs. But.. knowing what’s wrong and how to deal with it… I think there will be some news from energy prices and deregulation.

Lastly, I would like to express my sincere gratitude for your generous support in my new book, “The Great Transformation of the Exchange Rate,” which is currently on pre-sale. It is a book that deals with the turning point of the dollar, yen, and gold that is changing from the past… I recommend you to read this book as much as you have worked hard on it. The link is at the bottom ^^* Essay line. Thank you~~

pro/S000