Hello everyone, I am Mo Chen. 2022 is coming to an end. Before 2023 arrives, the Federal Reserve will raise interest rates again .
As the last round of interest rate hikes this year, it actually released a lot of signals.
And these signals will affect the world in 2023.
Today, Mo Chen will take everyone to see what kind of impact this round of interest rate hikes by the Federal Reserve will have on the world in the future.
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Let’s first look at the results of the Fed’s interest rate hike .
The main purpose of the Federal Reserve's series of interest rate hikes this year is to reduce inflation. I think friends who pay attention to this content should all understand it.
But with interest rates rising for so long, has inflation really been brought under control?
Judging from the results, it can only be said that the cpi index has fallen back, from a historical high of 9.1% to around 8%.
However, the Fed’s goal is to maintain inflation at around 2% for a long time. It can be said that the current results are not far from the Fed’s ultimate goal.
So this time when interest rates are raised at the end of the year, the Federal Reserve has sent a signal.
That is, in 2023, it is a certainty that the Federal Reserve will continue to raise interest rates.
html Although the intensity of the interest rate hike at the end of 2000 has slowed down, it was only 50 basis points.But the inflation target has not yet been reached, and they will not stop there.
Through this signal, we can also see what difficulties the United States will encounter in the future.
Dilemma 1: The unemployment rate may rise.
In the United States today, the unemployment rate has been on a downward trend, and the employment situation seems to be very good.
But anyone with a discerning eye knows that this is just an illusion.
Due to the impact of the new crown epidemic, many industries are facing labor difficulties. Such as terminals, transportation, etc.
The reason why the unemployment rate has dropped is because companies are eager to recruit workers. This short-term employment boom does not mean that American companies are in a state of recovery.
At present, many Internet companies in the United States are desperately laying off employees.
Musk just acquired Twitter and laid off 50% of its employees. Secondly, established companies like Best and Amazon are also in the midst of layoffs.
Why do big companies start laying off employees?
Because financing costs are increasing sharply and corporate growth is weak, the only option is to reduce costs and increase efficiency.
American companies are not having an easy time these days.
A series of interest rate hikes are causing the financing costs of American companies to increase sharply.
Enterprises that have not taken out loans dare not take them. Because the general environment is not good and facing high interest rates, the profits created by loan funds are not even as high as the interest rates.
Companies that have taken out loans are under greater pressure to repay. interest rates are increasing month by month, and business operating costs have increased sharply. It must have been a difficult time.
If we continue to raise interest rates, it will only further increase the pressure on enterprises. What will happen to the unemployment rate then? I think everyone can understand.
The unemployment rate in the United States is currently at a low level. The fundamental reason is that the impact of the epidemic is reducing and employment has returned to its original state.
Continued interest rate hikes will soon puncture this false employment boom.
In addition to the increase in business operating costs that will affect employment, another factor will also affect the employment situation in the United States.
That's where the money goes!
In previous years, Bank of America interest rates were at very low levels.
Ordinary people are more willing to put their money in the financial market. The financial market has also maintained 0 interest rates, and profits and losses all depend on the projects invested.
The current U.S. bank deposit interest rate has reached a historical high.
This will also attract more liquid funds to bank savings.
There is less hot money , and it is more difficult for companies to finance. And the desire to consume will be reduced, and rational consumption will become the mainstream.
These phenomena are really not a good thing for enterprises.
Enterprise management is worrying, so how can we talk about employment?
Dilemma 2: The United States’ debt will further increase.
There is nothing to say about this point. The trend of US debt increasing year by year was a big problem for them a few years ago.
The current series of interest rate hikes can only put the brakes on the economy.
The economy cannot recover, and fiscal revenue will certainly not increase much.
But the pressure on the United States to repay its debt is getting higher day by day.
Because of the interest rate hike, the interest rates of U.S. bonds will rise with it.
When U.S. debt interest rates were low, the U.S. struggled to repay its debt. Now that interest rates are gradually rising, the pressure can be imagined.
It is destined that the United States will revise the debt ceiling and again in 2023.
This kind of drama of replacing old with new is not sure how long it can be played.
After talking about the first signal and its impact, let’s talk about the second signal.
That is - raising interest rates will become the mainstream, and the United States is exporting risks and pulling the world to pay for it.
The Federal Reserve's interest rate hike will, on the one hand, control the hot money in the market, and on the other hand, it will also prompt the dollar to flow back.
will make the US dollar strengthen rapidly in terms of currency exchange rates. The currencies of other countries will enter the fast lane of depreciation.
In order to protect the national currency and reduce the rate of currency depreciation. Many countries under greater pressure will follow the Federal Reserve in raising interest rates.
The Federal Reserve had just completed raising interest rates in December, and European countries began to follow suit. The central banks of the United Kingdom, the entire euro zone, and Switzerland have all raised interest rates by 50 basis points.
As we mentioned above, raising interest rates will put the brakes on the economy. The Federal Reserve has been raising interest rates in a series, and many countries have been forced to follow suit. This "tightening storm" is centered on the United States and spreading to the world.
So let’s look at Morgan Stanley’s predictions, and we don’t think they are exaggerated.
They predict that in 2023, the global economic growth rate will be about 2.2%, which is lower than the 3% in 2022.
This is the impact of global austerity on the economy.
The Federal Reserve raises interest rates, causing the dollar to appreciate rapidly and the purchasing power of the dollar in the world to increase.
The United States is exporting risks to the world and is also reaping the benefits.
will face tremendous pressure on countries that rely heavily on imports.
The most representative one is Japan.
Japan is an island country and its own resources are not rich. Although
has a large export volume, it also relies heavily on imports.
The Federal Reserve's series of interest rate hikes caused the Japanese yen to fall from 110:1 to 138:1.
The yen plummeted, causing its purchasing power in the world to plummet.
Many Japanese companies are extremely dependent on imports. Imported raw materials are processed domestically and then exported.
Although the depreciation of the yen is good for exports, many companies have fallen behind in the import process. The weakening purchasing power of the yen has also caused domestic prices to start to soar.
South Korea is similar to Japan. In the face of imported inflation, it can only follow the interest rate hikes, and the people's daily consumption and repayment pressure are also increasing.
The economic foundation of Japan and South Korea is pretty good. For emerging countries with weak economic foundations, the risk of U.S. exports will make them face greater difficulties.
In the face of US interest rate hikes, the financial risks of emerging countries will increase. Although in such areas, the return on investment of is high, the increase in risks will reduce the investment confidence of foreign investors.
The flight of foreign capital is not good news for them. On the one hand, it will accelerate the depreciation of the national currency, and on the other hand, it will also have an impact on domestic industries.
There are generally two destinations for foreign capital to flee. One is to return to the United States, and the other is to more stable emerging markets. Because the purchasing power of the U.S. dollar has become stronger, in emerging markets, they are raking in the wool with exchange rate differences .
In this kind of cross-border trade, the United States will pass on its own inflation through transactions.
Because the US dollar is the world's currency, most countries will face the impact of imported inflation.
The global economy can only follow and be forced to bear the pressure.
To be honest, this kind of behavior by the United States has no sense of responsibility as a major country. In order to solve their own problems, they drag the world into the water.
After the epidemic, economic recovery is the consensus of the whole world, but a series of operations by the United States have made the idea of economic recovery in many countries empty talk.
Seeing this, some friends must want to ask, what impact will the Federal Reserve’s continued tightening policy have on us?
Let’s talk about the exchange rate level first.
RMB has fallen from its peak of 6.2 to around 7 now. To be honest, the drop is not small, but overall it is controllable.
The current exchange rate of the RMB remains at around 7. It can also be seen that our currency is very strong.
This is due to our US dollar foreign exchange reserves and the stability of the domestic investment market.
Many countries have staged a great flight from US dollar assets, but there is no great flight here.
In the post-epidemic era, our economic stability has withstood the test. Not only did foreign capital not escape much, but it poured in in large numbers.
Some time ago, the European manufacturing industry fled. The first destination was the United States, and China also became one of their alternatives.
Therefore, the Fed's interest rate hike will have an impact on the country, but the impact will not be that big.
From an inflation perspective, we will have imported inflation, but the cpi index remains at around 2%, which is a very healthy inflation state.
From an export perspective, the depreciation of the RMB is good news for domestic manufacturing exports.
The fifth industrial transfer is currently taking place around the world, with the main transfer locations being Southeast Asia and India.
China will lose a lot of manufacturing orders.
A lower exchange rate can actually enhance our competitiveness, slow down this transfer, and improve the moat for exports.
In the context of the slowdown in global economic growth, the impact we have received is actually not that big.
The current domestic epidemic prevention and control policy has a soft landing, which will further liberate productivity.
In the first half of the year, we will still be affected by the epidemic, but in the second half of the year, when herd immunity is established, economic vitality will be demonstrated again.
In 2023, my country's gdp growth rate is predicted to be 5.5%.
is quite good data. Some people here may say, if India’s growth rate is above 8%, is it better than us?
I think the gap between India and us is at least twenty years.
The premise for looking at the growth rate is the base number.
India currently has a lot of dividends , demographic dividends , labor cost dividends, etc.
This has also made India one of the centers of the fifth industrial transfer in the world.
They are enjoying the dividends brought by industrial transfer, but their industrial base and manufacturing technology are still far behind China's.
They still have many years to go on the road to perfecting the industrial system.
In 2023, the domestic economy will definitely look better, but many industries will also face impacts.
Especially low-end manufacturing.
There is nothing we can do about it. Due to industrial upgrading, the low-end manufacturing industry is facing the impact of overcapacity and , and it is destined to be eliminated.
In 2023, there are many things worthy of our attention and many things worthy of our vigilance.
For real estate, traditional industries, and low-end manufacturing, it is necessary to weigh the risks of investment.
You can pay more attention to emerging industries, highly innovative, and independent brand products.
Overall, I hope everyone can stay optimistic. Now that the epidemic has been eased, returning to normal life is the general trend.
also hopes that everyone will have a wonderful and sunny year in 2023.
What do you think of 2023? Welcome to discuss and leave messages in the comment area.
I am Mo Chen, let us use an economic perspective to see the real world!
