Group 1 - The article discusses the concept of "stagflation" as a significant economic challenge, highlighting its origins and implications for economic policy [1][3][5] - It outlines the historical context of stagflation, particularly during the 1970s in the United States, where inflation and unemployment rose simultaneously, creating a complex economic environment [3][14] - The article emphasizes the cyclical nature of economic downturns, suggesting that stagflation often initiates periods of economic recession [5][19] Group 2 - The piece explains how Keynesian economics was initially embraced by the U.S. government to stimulate the economy, but ultimately led to stagflation due to excessive money supply and government spending [7][11] - It details the political pressures faced by U.S. presidents, who often prioritized short-term economic relief over long-term stability, exacerbating stagflation [11][14] - The article highlights the role of monetary policy in managing stagflation, particularly the contrasting approaches of different administrations, such as Nixon's expansionary policies versus Reagan's tightening measures [16][17] Group 3 - The narrative illustrates the impact of external factors, such as oil crises, on the U.S. economy, which intensified stagflation and challenged policymakers [14][19] - It discusses the importance of restoring public confidence in currency and the economy as a means to combat stagflation, emphasizing the need for decisive action from leadership [17][19] - The article concludes by reflecting on the lessons learned from past stagflation experiences, suggesting that a combination of tight monetary policy and structural reforms may be necessary to address similar challenges in the future [19]

Core Viewpoint - The ongoing conflict between President Trump and the Federal Reserve has intensified, particularly targeting Fed Governor Cook, with accusations of mortgage fraud and calls for her resignation [1][4]. Group 1: Trump's Influence on the Federal Reserve - Trump's criticism of the Federal Reserve, particularly Chairman Powell, has been consistent since his first term, but his control over federal institutions has increased during his second term, raising market concerns about his potential influence over the Fed [3][4]. - If Cook resigns or is dismissed, Trump could appoint a loyalist, increasing his allies on the Fed's Board from three to four, thereby enhancing his control over monetary policy [4][6]. Group 2: Implications of Federal Reserve Independence - Historically, the independence of central banks has allowed them to manage inflation effectively without political pressure, a principle that many economists view as sacred [6][7]. - Trump's economic advisor, Stephen Moore, has expressed skepticism about the Fed's independence and has advocated for reforms that would give the president greater control over the Fed's governance structure [7][8]. Group 3: Potential Economic Consequences - If Trump were to gain full control over the Fed and push for aggressive rate cuts, it could lead to inflationary pressures reminiscent of the stagflation crisis prior to the 1980s, which could ultimately harm his political standing [8].

Core Insights - The recent increase in tariffs to $28 billion has led to significant price hikes for consumers, contradicting the expectation that foreign entities would bear the cost [1][3][12] - A report from Goldman Sachs indicates that by October, consumers will absorb 67% of the tariff costs, a stark shift from earlier where businesses bore 64% of the costs [3][5] - The actual effective tariff rate has reached 18.6%, the highest in 90 years, resulting in an average additional cost of $2,400 per household [5][9] Tariff Impact on Consumers - Over 75% of businesses have opted to pass on tariff costs to consumers rather than absorbing them, leading to increased prices for everyday goods [3][5] - Specific price increases include a 37% rise in footwear and significant hikes in appliance prices, directly affecting consumer spending [3][5] Economic Consequences - The trade war has resulted in a decline in trade volume, with a 2% drop in physical imports in the first half of the year [7] - The U.S. is experiencing a potential stagnation combined with inflation, termed "stagflation," as the Federal Reserve grapples with the implications of rising prices and economic slowdown [9][12] Broader Trade Dynamics - The U.S. has seen a shift in trade partnerships, with China’s share of U.S. imports dropping below 9.5%, while other regions like ASEAN and Latin America are stepping in to fill the gap [7][9] - The agricultural sector is particularly hard hit, with U.S. farmers facing reduced demand and falling prices for their products due to shifting trade patterns [7][9] Long-term Outlook - The current tariff strategy is likened to a short-term financial boost with significant long-term negative consequences, as it fails to address underlying economic issues [9][12] - Historical parallels are drawn to the Smoot-Hawley Tariff Act of 1930, suggesting that current policies may lead to similar economic downturns [12][14]

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - The further decline of US Treasury yields before September may be primarily driven by weaker economic data leading to higher expectations of interest rate cuts, or by the "see - saw effect" triggered by the weakness of other assets. The 10 - year yield is expected to fluctuate at a low level in the range of 4.00 - 4.30%, but inflation and the "Big and Beautiful" Act may impede the decline of long - term yields [4][14]. - In the two - week period from July 18 to August 1, 2025, affected by the US July non - farm payroll report, global investors' risk - aversion increased, resulting in a double - kill situation in the US stock and bond markets. Different asset classes showed various trends, including significant declines in US and UK government bond yields, a new high in the Japanese stock market, a slump in the US stock market, an upward trend in the coking coal index, a decline in Chicago agricultural product futures prices, and a depreciation of the ruble and the euro [5][15]. Summary According to the Directory 1. What Conditions are Needed for the Further Decline of US Treasury Yields? - **Monetary Policy**: At the July FOMC meeting, the interest rate and other monetary policies remained at the June level, in line with market expectations. Waller and Bowman voted against interest rate cuts, citing signs of weakness in the labor market, and Kugler, who was set to leave early, did not attend or vote. Kugler's early departure may increase Trump's influence on the Fed and lead to more divided views within the Fed [1][10]. - **Growth**: Q2 GDP showed a quarter - on - quarter increase of 3.0%, but the main drivers were a decline in imports and accelerated consumer spending. Private consumption and investment weakened, with PDFP growing by 1.2% quarter - on - quarter, lower than the 1.9% in Q1 [2][10]. - **Inflation**: In June, inflationary pressures emerged, with CPI at 2.7%, core CPI at 2.9%, PCE at 2.6%, and core PCE at 2.8%, all reaching the highest levels since March [2][10]. - **Employment**: In July, the ADP employment figure rebounded unexpectedly, but the non - farm payroll data was disappointing, with significant downward revisions to previous months' data. The unemployment rate rose from 4.1% to 4.2%, which greatly disrupted the interest rate market expectations, causing the 1 - year yield to decline by about 17bp on August 1 [2][11]. - **Policy Stance**: Some Fed presidents still recognize the resilience of the economy and employment and maintain a restrictive monetary policy stance, denying the risk of recession and affirming the risk of stagflation [3][12]. 2. Bi - weekly Overseas Macro - analysis - **Interest Rates**: In the past two weeks, US Treasury yields declined significantly, with the 1 - year and 10 - year yields both dropping 21bp to 3.87% and 4.23% respectively. Affected by US Treasuries, UK government bond yields also declined on August 1, increasing investors' risk - aversion [5][16]. - **Equities**: The Japanese stock market reached a new high, with the Nikkei 225 index rising 2.46% in the past two weeks, driven by the US - Japan trade agreement on July 23. However, trading volume was low in July. The US stock market slumped after the release of the July non - farm payroll report, with the Nasdaq index dropping 2.29% on the night of the report release [17]. - **Commodities**: The coking coal index rose 12.07% in the past two weeks after the central government emphasized governance of low - price and disorderly competition in the coal industry. Chicago agricultural product futures prices fell across the board, pressured by high expectations of a bumper US autumn harvest [18]. - **Foreign Exchange**: The ruble depreciated by 3.44% in the past two weeks after the Russian central bank cut interest rates by 200 basis points on July 25. The euro fell 1.24% due to the impact of the US - EU trade agreement and a decline in investor confidence [19]. 3. Market Tracking - The report presents multiple charts, including the bi - weekly fluctuations of global major economies' government bond yields, global major stock indices, major commodities, and global major foreign exchange rates (against the RMB), as well as the latest economic data panels of the US, Japan, and the Eurozone, and the yield curves and inflation trends of US, Japanese, and German government bonds [24][28][30][32][35][41][45].