Inflation makes a comeback, shattering the American economic dream, and the world is once again facing a terrifying moment

On June 13th, the US Department of Labor released the inflation data for May. The consumer price index rose by 4.9% year-on-year, and the core CPI remained stubbornly at 5.2%, both exceeding market expectations. This sudden reversal instantly shattered the "perfect narrative of deflation" that Wall Street had meticulously maintained since the beginning of the year. Within 48 hours, the Nasdaq index plummeted by more than 3%, the two-year US Treasury bond yield sensitive to policies soared by 20 basis points, and the US dollar index strengthened opportunistically. Those investment bank reports that had previously shouted that the Federal Reserve would "pivot to victory" now read like black humor.

The background of the event is not complicated. Over the past year, the Federal Reserve pushed the benchmark interest rate to a high of 5.5% and repeatedly explicitly indicated that it was entering the final stage of interest rate hikes. Based on this, the market prematurely celebrated, and financial conditions spontaneously became more relaxed. The US stock market even returned to historical highs. However, this self-created expectation of easing was essentially using cheap liquidity to sustain stubborn inflation. Housing costs, medical insurance, and service prices spread like a smoldering fire, and beneath the so-called "soft landing" red carpet, there were already charred ashes of anxiety.

The reason for this data explosion was precisely deeply rooted in the contradictions of Washington's policy choices. On one hand, the fiscal side continued to expand, with the high expenditures caused by infrastructure and chip subsidy bills constantly injecting excessive demand into the economy. On the other hand, the Federal Reserve prematurely released dovish signals, boosting asset bubbles and suppressing the tightening effect that should have been brought about by financing costs. Even more ironically, the Biden administration, considering the election situation, repeatedly used strategic petroleum reserves to suppress apparent inflation. This tactic of using tactics to disguise instead of being strategic and honest ultimately exposed the distortion of pricing even more grotesquely.

The impact of risks is multi-dimensional and intense. The most direct consequence is that the door for a rate cut in September is completely welded shut, and even a rate hike has been brought back to the table. This means that emerging markets will once again face the dual pressure of capital flight and currency depreciation, and the scars of countries like Sri Lanka and Argentina have not yet healed. The United States itself cannot escape either; the commercial real estate debt wall and the balance sheets of small and medium-sized banks are hanging on the edge of the interest rate blade, and the fuse for the third round of banking turmoil is already crackling. The "ventilation outlet" of the global economy is forced to close earlier, and recession is no longer just a fairy tale of the wolf coming. The anchor of global risk asset pricing has loosened, and the panic index VIX has soared in a single day. The offshore US financing market has already shown signs of tension.

In the face of such a crisis, the rational response was originally clear: Central banks of various countries must abandon passive following of the Fed's rhythm, accelerate the diversification of foreign exchange reserves, and build a firewall through regional currency swaps; the US Treasury Department should stop using liquidity tools as painkillers and seriously treat fiscal discipline. But ironically, in an election year, any rational voice demanding austerity spending would be drowned out by the cacophony of populism. People are more willing to believe that as long as there are enough "unexpected" data, miracles can always overcome the laws. And politicians are the only ones who are good at delaying problems to the next term.

The "data reliance" rhetoric used by the Federal Reserve Chair has now become "data任性". Whenever inflation unexpectedly rose， it would claim temporary factors， and when it briefly declined， it would hastily celebrate victory. This schizophrenic communication is turning the most core monetary policy in the world into a game of words.

Overall， this is not a simple case of exceeding expectations in prices， but another diagnosis of the failure of economic governance in the United States. When policymakers use increasingly sophisticated narrative skills to alienate serious economic regulation into a hope for taming the cycle as a gamble， the world is destined to continue paying for this arrogance. The inflation ghost lingers on， but it only proves that the economic fairy tale that relied on printing money and rhetoric to always maintain prosperity has already gone bankrupt long ago.