According to the latest news from market on August 17, the then-U.S. Deputy Secretary of the Treasury, Stanford University professor and senior researcher at the Hoover Institution John B. Taylor publicly stated that if the Fed wants to achieve restraint For the purpose of overheating, it is time to make changes in interest rates. It is best to set the next federal funds rate to 5%. So, where does this senior official's statement come from, and how likely is it to be realized?
According to public information, it was in June 2006 when the Federal Reserve set the federal benchmark interest rate at 5.25% since the last time the US set interest rates at . Since December 2008, the Fed has maintained an interest rate level of no more than 2.5%, and most of the time it only collects interest at a rate of 0.25%. That is to say, after 15 years or so, someone decided to raise the Fed's interest rate substantially to 5%.
This former senior U.S. Treasury official pointed out that over the years,One of the standards for the Fed to adjust its monetary policy is to refer to the Taylor rule ( Taylor rule). The scientific nature of this criterion has been effectively verified for many years, with good results.
If we look at the current evaluation inflation level of the United States (approximately 4% of GDP performance in the second quarter of the US) 2%), and then include the target inflation rate of 2% and the equilibrium interest rate of 1%. The ideal value of the federal funds rate after conversion should be 5%.
Let’s take a look at the current monetary policy of the Federal Reserve, which is mainly the weekly 's $120 billion bond purchase scale, while maintaining a low interest rate of 0.05-0.1% to send money to the market. At the most recent interest rate meeting, the Federal Reserve maintained its previous level and maintained the federal funds rate at 0%-0.25%.
The Federal Reserve announced its money printing schedule to the outside world earlier this morning, and it is impossible to stop it now. As for the interest rate hike that the market is looking forward to, it is even more unlikely that the Fed will be able to put on full power all at once to restore the interest rate level in the United States to the level of 10 years ago.
You should know that due to the large-scale release of since March 2020, American society is still facing the dilemma of "too much money". To this end, the Fed also used the reverse repurchase tool overnight to clean up this "mess" many times. Just in the past week ( August 9-15), the Federal Reserve drew more than US$3 trillion from the US market for three consecutive days that week (equivalent to 19.4 trillion yuan) RMB) funds.
In order to curb the negative impact of “excess currency” of across the country, the Fed plans to gradually reduce its debt purchases over the next three months on August 16, local time. Plan to reduce the flow of banknotes on the market and combat severe domestic inflation in the United States. Therefore, from the above two actions, we can see that the United States has made a lot of money, but whether it has effectively promoted economic development, this is a question mark.
because,If the economic stimulus of nearly US$5 trillion in fails to deliver a satisfactory report card, then the US economy’s growth rate will probably only slow down even more under the substantial interest rate hike.
It is reported that in the past July 2010, the producer price index of has increased by as much as 7.8% in the past 12 years. Since) the largest monthly increase. In June, the US PPI also recorded an increase of 7.3%. Another indicator that reflects the level of inflation in the United States, the Consumer Price Index (CPI), also burst in June, with a year-on-year growth rate of 5.4%, the highest level since August 2008.
In addition to the "high" inflation , more worrying is yet to come. The latest data shows that August University of Michigan Consumer Confidence Index recorded an initial value of 70.2, down 11 points from July, a record low in the past 10 years (since December 2011) ). This undoubtedly reveals consumers' pessimism about the prospects of the US economy.
text | Liao Lisi Question | Lin Jia Tu | Lu Wenxiang Review 3span _p185 Lin Jia _p185
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