Trade War May Bring Inflation, Fed’s Williams Warns

The US-China trade conflict will surely expand inflation, said John Williams, president of the New York Federal Reserve Bank.

“If there were a further escalation in terms of tariffs those effects would get even larger,” he said in a Bloomberg TV interview Tuesday, where he didn’t provide any hard numbers. “This starts to affect consumer prices as these tariffs are applied more broadly. The consumer sees it in prices paid in stores. That’s a significant effect.”

Williams, as New York Fed chief, occupies one of the most influential posts at the central bank. Previously the head of the San Francisco Fed, he has been associated with the dovish camp advocating lower rates. But in the recent past, he has seemed to be more hawkish.

With President Donald Trump’s decision to boost tariffs on $200 billion in Chinese merchandise to 25% from 10%, and Beijing’s retaliation in kind on $60 billion in American goods, the odds are that US prices will escalate. Just how much remains an open question.

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This is a significant issue for the Fed, which has put its rate hikes on hold while it awaits more economic developments. Trump on Tuesday renewed his urging for the Fed to lower rates, as a tactic to ease any burdens on Americans.

Overall, Williams did not sound overly alarmed. Central banks must get ready for an era of slow growth and subdued interest rates, he told a panel at a conference in Zurich Tuesday.

“Central banks should revisit and reassess their policy frameworks, strategies, and toolkits, to maximize efficacy,” he said, given a global environment where high savings rates and relatively low investment keep down interest rates.

Right now, inflation is a tame 2% annually as of April. And unemployment last month was at a 49-year low, 3.6%.

Tags: Donald Trump, Economic Growth, Federal Reserve, Interest Rates, Jerome Powell

The University of Michigan’s $12.2 billion endowment is looking to invest even more with seven private market funds, according to agenda materials for its May 16 regents board meeting.

Just how much they’d receive is still unclear, although since last year, they each got substantial boosts in capital commitments. Bain Capital Asia IV, Primary V, and Summa Equity II are private equity funds. Abax Asian Structured Private Credit Fund III and two Napier Park funds (ELM Series III and Henley Series I), are private credit vehicles. And Jacobs Asset Management Partners (JAM) is a hedge fund. Michigan classified private credit and hedge funds as absolute return.

These are well-diversified in their asset allocation, covering various regions and sectors ranging from health care to tech. Bain covers mostly Asia, specifically companies headquartered in greater China, Japan, India, and Korea. It also works in Australia

London-based Primary V does its business in the UK, and Summa handles Sweden and Norway.

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The others are more narrowly focused, although they do their part to enhance UMich’s overall diversification. Hong Kong’s Abax does direct lending to small- and medium-sized Chinese businesses and others with a “significant Chinese connection,” according to the agenda. The two other private credit funds from Napier are based in London—they only deal in Europe. JAM is a financial sector stock-focused hedge fund with a knack for market themes such as regulatory changes and disruptions.

Although the agenda materials did not say how much money it wants to put in each fund, the Michigan’s endowment has ladled out significant extra investments in the recent past. In November, it made a $50 million commitment to Abax. Of the six funds, the most recent increase was for Primary V, which scored a $38 million investment in January. The other five received injections between $50 million and $100 million in December.

The University of Michigan endowment allocated 23.2% of its assets under management to absolute return and 12.2% to private equity as of March 31.