WASHINGTON — Euphoria over a “cooldown” in US inflation ignores a vital variable: how China’s reopening process is about to propel commodities prices even higher.
This cooldown argument is fast gaining currency following reports that showed prices rose just 7.1% in November year-on-year. US Treasury Secretary Janet Yellen has hit the news circuit to make the cooldown case.
With the most aggressive Federal Reserve tightening cycle since the 1990s and the inflation-reduction scheme enacted by US President Joe Biden’s Democratic Party, Yellen says prices are going to continue surprising to the downside.
But not if China’s Covid reopening trade has anything to say about it. The sheer speed of President Xi Jinping’s pivot away from “zero-Covid” lockdowns is about to reintroduce the power of Chinese demand into global goods markets.