Will inflation in the United States make a comeback? If it does, what will Americans do? Will the dollar raise interest rates again? What will happen to the world?

Recently, some analysts in the United States have warned that inflation is not only not dead, but could also make a comeback at any time. Americans are clearly aware of the stubbornness of inflation and what exactly causes it.

Why are Americans worried about the return of inflation? The answer is that the shadow of the past few years is too great, coupled with some recent data and unexpected events, inflation has started to stir again.

In August of this year, although the U.S. CPI has significantly decreased from the peak of 9.1% in June 2022, it is still higher than the 2% target set by the Federal Reserve.

The CPI in August rose by 2.5% year-on-year. Although it seems to have further decreased, the month-on-month increase of 0.2% is the same as last month, and the speed of inflation decline has not changed.

At the same time, the core CPI in August rose by 0.3% month-on-month, which is 0.1 percentage points higher than the increase in July, indicating that the core inflation increase is accelerating. In addition, the core CPI in August rose by 3.2% year-on-year, which is still a worrying figure.

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At this critical moment, on September 19, the Federal Reserve lowered interest rates due to the pressure of the declining job market.

After the interest rate cut, although Americans tried their best to stabilize the US dollar index, the international oil prices, which have a great impact on the U.S. CPI, are becoming more and more uncontrollable and have shown an upward trend.

Data shows that during the National Day holiday, international oil prices rose for four consecutive days, surging by more than 9%. Yesterday, Brent crude closed at $78.05 per barrel, and there is still a lot of room for increase from the highest point of more than $90 in the first half of this year.

Recently, many American analysts have warned of inflation risks. In addition to the inherent instability of the data, there are several other reasons that show the risk of inflation in the United States is increasing.Firstly, the most apparent unexpected factor is geopolitics. Tensions in the Middle East are escalating, with the possibility of Israel attacking Iranian oil facilities and the Resistance Axis potentially retaliating on key energy shipping routes, all of which could lead to a surge in oil prices.

Secondly, the U.S. non-farm employment data released on October 4th showed an unexpected increase, sparking new concerns. Analysts believe that if U.S. employment data continue to grow beyond expectations, the market must also be vigilant about the inflation risks behind wage growth.

Thirdly, the recent wave of strikes has dealt a heavy blow to the U.S. supply chain system, providing the most direct support for inflation.

Several recently released data points have shown the resilience of the U.S. economy, with the market estimating a 99% probability of the Federal Reserve lowering interest rates by 25 basis points in November, which paradoxically increases the pessimistic expectations for inflation.

Why are Americans so afraid of inflation? In addition to the shadow of inflation that has lasted for years, causing a huge impact on the lives of more than 300 million people across the country, more importantly, they are very clear about the root cause of inflation.

What is the root cause? Simply put, in the past few years, too many dollars were printed, leading to more currency in Americans' hands while goods became scarcer. Currency, without goods, will increasingly lose its value.

Or, the deglobalization, decoupling, and other policies they have actively promoted have hindered the supply of goods and prevented Americans from comparing prices globally to purchase cheaper products.

So, if inflation returns, what will the U.S. do? Will the dollar raise interest rates again? What will happen to the world?

U.S. economist Mohamed El-Erian clearly stated that the unexpectedly strong employment report in September reminds people that inflation has not disappeared.

He believes that the Federal Reserve may need to refocus on curbing inflation and stop discussing the issue of focusing solely on the employment rate.Former U.S. Treasury Secretary Lawrence Summers has bluntly criticized the decision to lower interest rates by 50 basis points in September as a colossal mistake. These viewpoints are clear: if there is a trend of rising inflation, the Federal Reserve should at least slow down rate cuts or even pause them.

So, is it possible for the dollar to raise interest rates again? This is obviously unlikely, as President Trump dislikes rate hikes, and the Democrats are also hesitant to do so. They are under fierce attack from the Republicans for their poor economic performance.

This attack is very damaging because it proves that as Vice President of the United States, Kamala Harris and President Biden have not only failed to effectively curb inflation over the past four years, but the economy has also deteriorated.

This is also the main reason why, compared to the series of poor economic data in September before the dollar rate cut, the economic data in October suddenly improved. The Democrats need good economic figures to avoid a crushing defeat in the elections.

So, would pausing rate cuts cause problems for the dollar? The issues are significant.

When the entire nation is prepared for a rate cut in the dollar, the Federal Reserve's sudden braking is a disaster, especially as the capital market will fall into great confusion. Wall Street may not even know how to arrange investment strategies.

At the same time, with the pause in rate cuts, many funds that have already been initiated will also begin to wait and see, and the risk of a U.S. economic recession will increase again.

If we were to consider only the competition between China and the United States, the Federal Reserve would, of course, prefer to pause rate cuts to curb the upward momentum of Chinese assets. However, the internal pressure in the United States is clearly greater.

In reality, the best choice for Americans would be to cooperate fully with China, which would both suppress inflation and allow for confident rate cuts, but this is obviously not possible.Does it seem like no matter what is done, it's wrong? Perhaps, if inflation in the United States makes a comeback, it could become the biggest black swan event for the global economy in the fourth quarter.