China may delay Fed rate cuts

What does China have to do with a potential increase in US inflation? The link between the US price index, carefully observed globally, and the possible exit from the dragon's economic crisis exists and scares the prospects of US power.
Indeed, according to new research from the Federal Reserve Bank of New York, Beijing's efforts to revive production and support the economy in a context of housing crisis could exert "significant upward pressure" on US inflation and delay the beginning of the Fed's monetary easing.
The issue is crucial.
The Fed's preferred gauge of U.S.
inflation fell to 2.4% in January, less than half from a year earlier, but still hovers above its 2% target.
Investors currently expect the central bank, which has been raising rates at the fastest pace in decades to fight inflation, to start cutting them in June or July.
Any obstacle to this move – for example, twists and turns from China's growth – would be a major blow to the world economy.
read also How China will influence the price of oil in 2024 US against China also on inflation: can Beijing push prices in America? The Federal Reserve Bank of New York has highlighted how interconnected the economic affairs of world powers are and has launched an alert on the role played by the dragon in global economic balances.
The US noted that credit flows to Chinese factories have accelerated sharply in recent years, as the authorities are trying to compensate for the decline in loans to the real estate sector.
Furthermore, a change is becoming evident in the rhetoric of the leaders of the Asian nation when talking about industrial policy.
The new approach aims to stimulate China's economic growth above the rates of the past two years, at least in the short term, New York Fed economists wrote.
The graph developed by Bloomberg highlights how much loans for the manufacturing sector have increased compared to the real estate sector, demonstrating a boost to the industrial sector: If this scenario were to come true, the extra demand from producers in China would probably push up prices of raw materials and intermediate goods, and would result in a weaker dollar, according to the New York Fed team.
In turn, the consequence would be an upside risk to US inflation, the economists wrote.
“Such a boost to inflation could potentially delay market expectations for monetary policy easing.” The New York Fed team stressed that its finding “runs counter to conventional wisdom that a manufacturing-led expansion in China would have disinflationary effects for the United States.” This is because while prices of Chinese manufactured goods would likely fall due to oversupply, this would be offset by other effects such as rising raw material costs, they wrote.
read also How and why China is winning the lithium war against the US Any increase in Chinese economic output achieved by shifting credit flows would still give rise to short-term changes, since China already has an “outsized presence in the global manufacturing ecosystem,” the New York Fed argued.