<p>The conflict in the Middle East is impacting global energy supply. Former Chair of the Federal Reserve Janet Yellen pointed out at the HSBC Global Investment Summit that the global economy is currently facing localized energy supply shocks. Even in the most optimistic scenarios, rising global oil prices will trigger elevated inflation in stages, and the impact has spread to multiple areas including liquefied natural gas, fertilizers, and shipping costs. She anticipates that the Federal Reserve will cut interest rates later this year, but the current situation is unpredictable, stating, &#34;Many things are possible,&#34; and that the decision on rate cuts will be very cautious.</p>
<h2>The Federal Reserve is unlikely to raise interest rates</h2>
<p>Currently, the federal funds rate is maintained at a level of 3.5% to 3.75%. Yellen indicated that there are differing opinions within the Federal Open Market Committee (FOMC), with long-term inflation expectations remaining low and stable, while short-term expectations have slightly increased but are not a cause for concern. She noted that prior to the Middle East conflict, the Federal Reserve's monetary policy was well-positioned. If inflation does not decrease, authorities may not cut rates; if inflation declines as expected, they could return to neutral levels, and if the labor market is weaker than expected, they might even cut rates twice. She also mentioned that while the possibility of raising rates cannot be ruled out, it is unlikely to happen.</p>
<p>She continued to say that inflation due to tariff pass-through effects will take 6 to 9 months to dissipate. Although job growth in the labor market is slowing, a decrease in immigration has also reduced labor supply, which overall remains stable.</p>
<h2>White House intervention has exceeded norms</h2>
<p>U.S. inflation has been above the 2% target range for the past five years. Yellen stated that the next chair nominee, Waller, has a reputation as an &#34;inflation hawk.&#34; If Waller takes office, his policy stance may conflict with the Trump administration's low-interest-rate demands. Furthermore, the current White House's intervention in the Federal Reserve has exceeded norms, and if this intervention continues, the threat to the U.S. economy is increasing, risking a descent into a &#34;Banana Republic&#34; (i.e., a country that is corrupt and controlled by powerful forces).</p>
<h2>Clear opposition to &#34;decoupling between China and the U.S.&#34;</h2>
<p>Regarding the U.S. dollar, she believes that the long-term stability of the dollar's status relies on the credibility of U.S. macroeconomic policy. If inflation spirals out of control or the independence of the Federal Reserve continues to be undermined, it could weaken global confidence in the dollar. However, there are currently no currency options available that could replace the dollar, and the development of stablecoins is likely to be dollar-based, further solidifying its status as a reserve currency.</p>
<p>On the China-U.S. economic and trade relationship, Yellen clearly opposes &#34;decoupling between China and the U.S.&#34; and emphasizes that the trade and investment ties between the two countries are deeply complementary and should be maintained and developed</p>

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<p>Yellen stated at the HSBC Global Investment Summit that the global economy is facing energy supply shocks and is expected to cut interest rates later this year, but decisions will be made very cautiously. She pointed out that inflation due to tariff pass-through effects will take 6 to 9 months to dissipate, and the White House's intervention in the Federal Reserve has exceeded norms, which may put the U.S. economy at risk of becoming a "banana republic." Yellen opposes "decoupling" between China and the U.S., emphasizing the complementarity of the economic relationship between the two countries</p>

- The ongoing conflicts in the Middle East significantly affect global energy supplies, leading to increased oil prices and inflationary pressures across various sectors, including LNG and fertilizer.  
- Former Federal Reserve Chair Janet Yellen indicated that while the Fed may lower interest rates later this year, decisions will be cautious due to current uncertainties, with a divergence of opinions within the FOMC regarding inflation expectations.  
- Yellen emphasized the resilience of the U.S. dollar as a reserve currency, countering the notion of decoupling from China, and highlighted the importance of maintaining trade relations for economic stability.

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Yellen worries about stagflation, still expects interest rate cuts this year, criticizes White House interference with the Federal Reserve, fears the U.S. may become a "banana republic."