SJ Salomon International - Fed Could be Forced to Hike Interest Rates

Tokyo, Japan, June 09, 2021 --(PR.com)-- In recent weeks there have been renewed surges of COVID-19 cases in some of Asia’s key manufacturing economies. Taiwan, Vietnam, Japan and South Korea have all reported a dramatic rise in cases. Factories in these countries produce parts that are shipped around the world.

The US is a key export market for these countries and, as the US economy rebounds rapidly in the wake of the pandemic, demand for parts from these Asian manufacturers has increased dramatically.

“This sudden surge in demand for certain components, especially from the US and China, has resulted in an increase in factory-gate prices across East Asia,” said Mr. Youta Watanabe, Chief Finance Officer at SJ Salomon International.

Economists at SJ Salomon International have cautioned that any disruption to the global supply chain, including the closure of important manufacturing plants due to coronavirus outbreaks, would cause inflation to rise significantly.

With inflation being a key talking point for the US economy, economists at SJ Salomon International say it is possible that a spike in US inflation would prompt the US Federal Reserve to hike interest rates sooner than anticipated.

Throughout the pandemic and the initial recovery phase, the Fed has been committed to maintaining loose monetary policy and has pledged to keep interest rates low to allow for the pandemic-ravaged economy to recover.

“The Fed has stated previously that any increase in inflation would not be permanent as it would be relative to last year’s data when the economy was feeling the worst of the impact of the coronavirus and subsequent restrictions,” said SJ Salomon’s CFO.

But now many economists are speculating that the Fed will be forced to raise interest rates by year-end instead of in a year or two as was initially predicted.