Is the US economy in "stagflation"? Don't worry, this question may not be important. What is more worthy of our attention is how the US economic policy will respond. Although the GDP growth rate in the first quarter was weaker than expected, the core PCE price index exceeded the market consensus, but we cannot judge the performance of the US economy based on these data alone.

We see that the US economy has begun to show the hidden worries of "stagflation", but it also has strong growth momentum. Although fiscal spending has slowed down, personal consumption and private investment still show strong growth momentum. This is also the fundamental reason why the US economy has maintained high growth and inflation has been high for a long time.

For the Federal Reserve, the current combination of growth and inflation is certainly unsatisfactory. But we see that there have been differences within the Federal Reserve on interest rate cuts, which means that monetary policy is facing a new adjustment period.

In general, we still believe that the US economy is entering a new normal of "high inflation, high interest rates, and medium-speed growth." This new normal means that the United States is entering an economic process with a higher inflation center, and interest rates therefore need to be maintained at a higher level to prevent inflation from getting out of control. This also means that monetary policy needs to be adjusted in a timely manner to avoid major risks in the economy due to problems in a single or several sectors.

Therefore, whether it is stagflation or various landings, it only brings more disturbances and uncertainties to the market. What we should pay more attention to is how the US economic policy will respond.#USEconomy#Stagflation#MonetaryPolicy#FiscalPolicy