On November 21, the Financial Association reported (Editor: Zhou Ziyi) that former Chief Economist of the International Monetary Fund (IMF) Olivier Blanchard stated on Wednesday (November 20) that the economic policies of the newly elected President Donald Trump may lead to economic overheating and higher inflation, which would cause the Federal Reserve to raise interest rates again.

In a recent article published by the Peterson Institute for International Economics, Blanchard pointed out that "the risk of conflict between the Trump administration and the Federal Reserve is very high."

Blanchard is a senior researcher at the institute and a former president of the American Economic Association. It is well known that he accurately predicted the unexpectedly high inflation that surprised central banks after the COVID-19 pandemic.

Blanchard noted that the three main pillars of Trump's economic plan—imposing tariffs on imported goods, expelling illegal immigrants, and tax cuts—will all lead to higher inflation.

First, imposing tariffs on imported goods will lead to economic overheating and upward pressure on prices; second, expelling illegal immigrants will cause labor shortages and rising wages; additionally, tax cuts will also lead to economic overheating.

Blanchard stated, "Based on these three reasons, the Federal Reserve may see higher inflation. We don't know how severe it will be, but the Fed's duty is to prevent this from happening."

As a result, the Federal Reserve may raise interest rates again and strengthen the dollar. "Assuming this is the case, if the Federal Reserve does what it must do, it will certainly hinder what Trump wants," Blanchard added.

Blanchard is also very confident that current Federal Reserve Chair Powell will firmly adhere to the necessity of potential interest rate hikes before the end of his term in mid-2026. Furthermore, the next Federal Reserve Chair selected by Trump may not be able to maintain low interest rates in the face of rising inflation expectations.

He pointed out, "In my impression, the mission of the Federal Reserve has always been to maintain stability and low inflation, and most people think so too."

(Financial Association, Zhou Ziyi) $OP