The use of fiscal policy and monetary policy together to promote economic growth in the country is the main way of modern economic regulation. On April 28, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) released its forecast for the real gross domestic product (GDP) for the first quarter of 2022 at -1.4%. In terms of historical data, this is the first negative value since the second half of 2020. Meanwhile, the U.S. Dow Jones Industrial Average has fallen 6.66%, the NASDAQ 17.73%, the S&P 500 10.04%, and the Russell 3000 10.98%, triggering anxiety in global markets about the U.S. economy falling into recession. As a barometer of the country’s economy, the capital market can largely predict the trend and performance of the country’s economy in the next six months. According to the U.S. Department of Labor data, the U.S. unemployment rate fell to 3.6% in March this year. Although the U.S. employment data is slightly optimistic, if we take into account the most serious inflation in 40 years, the reasons for making a judgment that the U.S. economy is in “stagflation” may still be very strong.

“Stagflation is an economic phenomenon in which economic growth is stagnant and inflation is coexisting, manifested by price increases and rising unemployment. In the 1970s and 1980s, the United States experienced inflation and economic stagnation due to the impact of the oil crisis as a result of an excessively loose monetary policy. Accordingly, Western economics also created a “pain index” reflecting inflation and unemployment rates. In addition, global food and energy prices have risen to some extent against the backdrop of the Russia-Ukraine conflict. However, with the introduction of the U.S. economic data in the first quarter, the prospects for global economic recovery are expected to be confusing again. The Fed’s interest rate hikes and tapering to curb inflation could easily bring about a return of foreign dollars, thus raising the cost of economic recovery in developing economies and making it more difficult to coordinate monetary policy in major global economies, and global asset prices, commodities and energy prices, could all enter a new anchoring cycle. This is not good for the global economy, which is struggling to recover.

In addition, special attention needs to be paid to the structure of this quarterly data. In terms of the breakdown composition, the largest contributor in the first quarter was exports of goods and services, with a growth rate of 17.7% for the period, followed by personal consumption expenditures with a growth rate of 9.2%, forming a drag mainly on housing investment (-5.9%), and imports of goods and services (-2.7%). The quarter-on-quarter data show that the biggest decreases were in housing investment, government spending, and total investment, with the former falling from 22.4% in the fourth quarter of last year to -5.9% in the first quarter of this year, while the latter fell from 6.9% last year to 1.7%. In the chain data, the largest increase was in personal consumption expenditures, which rose from 2.9% last year to 9.2% this year. This data structure, in addition to being driven by the Federal Reserve’s double tightening policy, also reflects a large extent of the attitude tendency of the current U.S. government’s economic policy. This paper draws the following three trend judgments from it.

First, the United States may pay more attention to foreign exports and reduce the international trade deficit. Since the Obama administration launched the “manufacturing back”, the Trump administration advocates “buy American goods, hire Americans” policy ideas of the same line. And the Biden administration may continue to take employment policy and exports to do articles, which will inevitably promote the depth of the global economic and trade pattern. This is bound to promote a deep reshaping of the global economic and trade landscape.

Second, it is still hard to be optimistic about the short-term rebound of the US economy. Considering the inflationary spiral, in the face of strong inflationary expectations, residents are more willing to accelerate consumption and reduce investment to avoid the impact of future currency devaluation. The increase in personal consumption and decrease in investment in the U.S. in the first quarter is a typical reflection of this law. If social expectations converge, this will inevitably put a brake on economic recovery.

Finally, the U.S. economy into a substantial “stagflation” possibility is rising. Currently, the Federal Reserve has entered the double tightening channel. But the sudden outbreak of the Russian-Ukrainian conflict, making global food and energy prices into a new adjustment range, for this systemic external shock, the Fed to curb domestic inflation and tightening initiatives decision-making model, apparently did not take into account this exogenous variable.

On balance, if the Fed’s monetary policy continues to tighten next, it will naturally be possible to control inflation, but higher interest rates will also inhibit effective investment, thus dragging down the economic recovery and subsequently exacerbating the risk of stagflation. Conversely, if the only consideration is to stimulate the economy, the Fed slowed down the pace of double tightening or reduces the magnitude, inflation will continue again. In this way, it is easy to fall into a policy dilemma. Therefore, in the current situation, the United States into a short-term substantial “stagflation” is afraid that it is a probable event.