Aggressive monetary policies by the US Federal Reserve and other global central banks could affect economic growth

The Federal Reserve will raise interest rates non-stop and even slow the US economy if necessary to reduce inflation from its current 40-year highs. Record high fuel prices accelerate inflation and could eventually lead to lower energy demand as consumers find it increasingly difficult to pay those prices. US economic growth this year is likely to be 2.4%, about 0.8% below the Fed’s estimate, as the war in Ukraine causes more global negative shocks than expected, S&P Global said in its forecast.

Major US retailers point out that people are cutting back on buying larger items because people simply don’t have enough money. These are signs that high inflation is seeping into the economy.

Treasury Secretary Janet Yellen said the dollar had strengthened on higher interest rates in the US and that the rise had raised concerns in some other countries. For many emerging and developing countries, it has become more expensive to service dollar-denominated debt.

The head of the Swiss Central Bank has indicated that if inflation rises, the bank will act decisively. Switzerland is holding the lowest rate in the world at -0.75%.

Crude oil inventories unexpectedly fell last week by 3.4 million barrels. But that didn’t affect oil prices. Oil fell by 2% yesterday as the United States may ease some restrictions on the Venezuelan government, giving hope that the market may see additional supply. Japan will release 4.7 million barrels of crude oil from national reserves in June.

The European Parliament threatened sanctions against former German Chancellor Gerhard Schröder, who serves as chairman of the supervisory board of Russian state oil giant Rosneft. The European Parliament demands that the former chancellor resigns from his posts in Russian companies.

Asian markets closed in green territory yesterday. Japan’s Nikkei 225 (JP225) gained 0.94%, Hong Kong’s Hang Seng (HK50) added 0.20%, and Australia’s S&P/ASX 200 (AU200) was up +0.99%.

More than 60% of Japanese companies want the central bank to end its massive monetary policy easing policy this fiscal year because of yen weakness, with about a quarter urging it to take action now. A rapid slide in the yen to a two-decade low has jacked up prices of fuel and raw materials imports, lifting not only corporate costs but also hitting household spending. The Bank of Japan is not going to change its monetary policy yet, but it should be noted that Japan’s inflation rate is close to the 2% target. Now Kuroda wants to see inflation be sustainable.