This is Panda Beibei’s 1130th original article: The much-anticipated Federal Reserve’s interest rate decision in June was released. As expected by the market, it was 75bp. This has also become the Fed’s largest interest rate increase since November 1994.

This is Panda Beibei’s 1130th original article:

Federal Reserve interest rate meeting press conference, Federal Reserve Chairman Powell (Photo source: Headline Gallery)

Although Powell expressed a stronger determination to fight inflation at the press conference, and He deliberately avoided talking about a recession, but as he himself said, there are too many factors in the current overall inflation that the Fed cannot do anything about. The market is not optimistic about the prospects of a "soft landing" for the U.S. economy.

raised interest rates by 75 basis points, raising the benchmark interest rate to a range of 1.50%-1.75%. This is the largest interest rate increase in the past three decades since 1994, and the interest rate is raised to the high level before the outbreak of the epidemic in March 2020.

In June 2022, the Federal Reserve's monetary policy was clearly announced. It is no longer a simple "boot landing". For the global economy and financial markets under the background of high inflation and anti-globalization, it can be called a heavy hammer and a fierce impact. After the news of

was announced, US stocks closed up, the US dollar weakened, and the global capital market ushered in a strong trend; offshore RMB once rose by more than 800 basis points against the US dollar; even Bitcoin also rose half an hour after the news was released. It rose 7% within... What's weird is gold and oil:

Gold fluctuated and strengthened, and crude oil prices fluctuated and fell, but they were relatively strong. The prices of both gold and oil were still at high levels.

After the Federal Reserve’s interest rate meeting, the outside world also noticed the change in wording in the Federal Open Market Committee statement. This statement particularly emphasized that the Committee is committed to bringing the inflation rate back to the 2% target . This statement boosted market confidence to a certain extent.

Fed interest rate dot plot, picture source: Internet

The interest rate hike dot plot released after the meeting also reflects the Federal Reserve's more aggressive path to raising interest rates in the future.

expects the federal funds rate to rise to 3.4% by the end of this year. However, Federal Reserve Chairman Powell stressed that significant interest rate hikes will not become the norm.

Several highlights worth paying attention to at the interest rate meeting conference:

The Fed said it was "firmly committed" to returning the inflation rate to 2%, Inflation remains high, reflecting the supply and demand imbalance related to the pandemic, Rising energy prices and greater price pressure;

reiterated that continued interest rate hikes are appropriate.

Since 2022, starting in March, the Federal Reserve announced a 25 basis point interest rate hike, launching the first shot of this round of interest rate hikes. In May, it continued to raise interest rates by 50 basis points. This 75 basis point interest rate hike was the third in the year. The pace of interest rate hikes is very fast and the intensity is very strong, which indicates the rapid tightening of the Federal Reserve's monetary policy.

At the same time, based on reality and the current domestic economic situation and international situation in the United States, this interest rate hike has released a lot of signals and will also have a lot of impact on the U.S. and global economies in the future.

This article will conduct signal analysis and impact research based on the latest monetary policy trends and results announced by the Federal Reserve, combined with the current economic situation in the United States.

This article has been repeatedly self-examined and compliant. It does not touch red lines. The language is calm and fair, and it is not value-oriented.

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1

The background and process of the Fed's interest rate hike The balance sheet reduction review:

Let's first highlight several key points of this Fed's interest rate hike:

• The Fed raised interest rates overnight 75 basis points to 1.5%-1.75% , the rate of interest rate increase was the largest since 1994 and the largest rate increase in 28 years. This interest rate hike has been called the "Volcker moment" by the media.

• Outlook for future interest rate hikes: (The most hawkish interest rate hike expectations so far are mainly relative to the attitude of the US government and the Federal Reserve towards inflation)

• The probability of another 75 basis point interest rate hike in July is 93.4%, and the probability of a 75 basis point interest rate hike in September is 93.4%. is 55% (of course, is expected to manage , , the ancestral technology that controls the market, all serves interests, and dynamic economic changes do not count)

• The US dollar will raise interest rates to 3.4% at the end of this year, and there will be another 175 interest rate increase. basis points (to appease the market's panic about inflation)

• The U.S. dollar will raise interest rates to 3.8% by the end of 2023

• The statement of this interest rate meeting has been slightly adjusted. In the statement of policy objectives, reiterated that it will seek to achieve full employment and long-term inflation2 % dual target , delete the previous statement "With appropriate tightening of monetary policy, inflation is expected to return to the 2% target, and the labor market will remain strong", and change it to "will be firmly committed to restoring inflation to the 2% level”.

• Compared with the forecast value in March 2022, the Federal Reserve lowered the U.S. GDP growth rate in 2022 from 2.8% to 1.7%.

• In addition, has significantly raised its inflation expectations , raising the PCE inflation in 2022 from 4.3% to 5.2%, while also raising the core PCE inflation from 4.1% to 4.3%. The unemployment rate forecast was slightly raised, raising the unemployment rate in 2022 from 3.5% to 3.7%. The forecast for the federal funds rate has been significantly raised, and the federal funds rate will be raised from 1.9%, 2.8%, and 2.8% to 3.4%, 3.8%, and 3.4% respectively in the next three years.

Image source: Internet

Of course, this interest rate hike is actually in line with market expectations:

"People in ancient times and today are like running water, and they look at the bright moon together." History never simply repeats, but it always follows similar logic. Rhyme.

Unexpected macroeconomic fission will always inspire unconventional policy responses.

On June 16, the Federal Reserve's FOMC meeting raised interest rates by 75 basis points. Monetary tightening policy was further intensified. The effects of interest rate hikes and balance sheet reduction were superimposed, and the "Volcker moment" reappeared.

can be regarded as witnessing history. For the first time in 28 years, how many 30 years can a person experience in a lifetime?

Targeting inflation, whether it can be solved through monetary policy is another matter. However, the spillover benefits brought by the Fed's tightening of monetary policy will inevitably intensify the volatility of the international financial market. The U.S. dollar index continues to strengthen, causing some emerging market economies with fragile economic structures to face challenges. Risks of economic recession, currency devaluation and debt crisis.

is just such a thing, not complicated.

Image source: Toutiao Gallery

2

Signal analysis: What important information does the Federal Reserve release in this "violent" interest rate hike?

The Federal Reserve announced that it will raise interest rates by 75 basis points. Overall, this meeting conveyed multiple messages. First, the monetary tightening policy is intensifying. Second, interest rate hikes and balance sheet reduction are two-pronged approaches, and the tightening effects are superimposed on each other. Third, the "stagflation" state has been further established, requiring both full foresight and flexible response.

To put it simply, the Federal Reserve and the U.S. government, facing the increasingly fierce inflationary momentum and reality, can no longer continue to achieve the purpose of market control and market management through so-called expectation management and statement performances. Judging from the signals released at this meeting , the current policy thinking of the Federal Reserve is to first “squelch inflation at the expense of the economy” , and then turn to avoid a hard landing after inflation is brought under control.

It is completely forced by the situation, and it is a last resort. This time the Federal Reserve's interest rate hike has released very rich information based on the background and environment:

For the United States, there are only two possibilities for a soft landing of the economy:

Either the increase in domestic production and economy can catch up with the over-issuance of currency, consolidate the value of currency in circulation, and exchange time for space;

Or the U.S. government can use the tide of the U.S. dollar Successfully carry out global wealth transfer and economic harvesting smoothly and efficiently.

In the world, only the United States has the ability to achieve a soft landing of the economy. In fact, it has done so in the past few decades.

But at this time point in 2022, if the United States' ancestral dollar is harvested globally and the hegemonic robbery routine still works, it will never force the Federal Reserve to adopt the violent interest rate hike model of the Paul-Volcker era to fight inflation.

Inflation that can be transferred out is not a problem, and inflation that can be clearly controlled is not a problem for the United States.

Capitalists and Wall Street don’t care about inflation if they can make money.

However, 's move to raise interest rates this time has very clearly proved that the United States and the Federal Reserve are helpless in dealing with inflation, and that the Guizhou donkey has no skills. Hegemony is important, so he does not care about face.

. The Federal Reserve’s clear interest rate hike will set off a new wave of interest rate hikes in countries and economies related to the global dollar settlement system.

This causal relationship is very clear. If countries with dollar settlements do not raise interest rates, dollar capital will flow out in large quantities, using these countries' recession, debt storms, and depression to contribute to the prosperity of the United States. Therefore, in order to avoid this This is an inevitable trend. The vast majority of countries and economies will choose to follow the United States’ interest rate hikes, use magic to fight magic, and retain capital.

Because the US dollar is the global settlement currency, each round of interest rate hikes in the US dollar corresponds to the start of a global currency tightening cycle.

The economic conditions and cycles of different countries are different. The Federal Reserve only considers itself when raising interest rates, so various impacts and situations such as debt thunderstorms, economic fluctuations, supply and demand disorders, etc. on a global scale will become inevitable.

As time goes by, as long as the U.S. dollar raises interest rates and the reality of high U.S. interest rates is not reversed, the early progress of global inflation being suppressed and the economy will be misaligned, the world will inevitably fall into an environment of stagflation .

. The United States and the Federal Reserve mainly use monetary policy to combat this round of domestic inflation, which is an approach that treats the symptoms rather than the root cause.

Inflation is passive, while deflation is active.

uses dollar deflation to solve inflation on a global scale, which is a typical approach that treats the problem but does not cure the root cause.

There are three core reasons for this round of domestic inflation in the United States:

First, the U.S. dollar has lost control of oil prices due to the conflict between Russia and Ukraine;

Second, the U.S. government has targeted China out of face and so-called political correctness. Series of trade wars;

Third, local capital has taken advantage of the flood of liquidity to make a fortune, further pushing up inflation.

Of course, there is another hidden line, that is, a group of interest alliances in Japan, South Korea, and Europe have secretly continued to sell large amounts of

U.S. Treasury bonds, which has invisibly increased the liquidity of the U.S. dollar in the global economic environment.

Therefore, the United States wants to suppress inflation and maintain the hegemony of the U.S. dollar. This time, it is willing to take over the U.S. inflation and shift the target of inflation. No more, the U.S. has to pay for the money it spends. It is obviously OK to create contraction through monetary policy alone. It doesn’t make sense.

Next, reaching a settlement with Russia, selling out Ukraine interests, reducing tariffs on China, easing Sino-US relations, and hammering interest alliances are the fundamental directions. As for whether

will do this, it depends on whether the game of domestic interest groups in the United States and economic fundamentals can withstand it.

If the price of active deflation cannot be exchanged for inflation, then the United States will be in a very passive situation.

Therefore, whether the United States raises interest rates or shrinks its balance sheet, in fact, for the main game objects (China, Russia, the European Union ), from a national level, it does not matter. As for the follow-up, it will be a real showdown (game adjustment). Whether to flip the table (start a war) or not, it depends on how the United States chooses.

This is the key.

Image source: Toutiao Gallery

3

Based on the interest demands and trends of the United States, what will be the impact of the Federal Reserve’s interest rate hike?

As the Federal Reserve raises interest rates quickly and urgently, the impact it can have is comprehensive and targeted.

Here is a trend analysis and impact analysis:

For developing countries and emerging market countries, the U.S. dollar interest rate hike has two main impacts:

First, currency depreciation: After the Federal Reserve raised interest rates this time, the U.S. dollar appreciated, and many currencies have depreciated rapidly, such as the Japanese yen and Turkish lira. etc. It is expected that more countries' currencies will be turbulent in the future.

The second is to trigger a debt crisis: after the epidemic, the debts of emerging market countries are high. As U.S. dollar capital outflows, debt risks continue to increase. The dollar index continues to strengthen, causing some emerging market economies with fragile economic structures to face the risk of economic recession, currency depreciation and debt crisis.

The same is true for China. Even if China does not follow the U.S. dollar cycle, interest rates will fall and the space for releasing liquidity will be limited.

The U.S. dollar raises interest rates and the U.S. dollar strengthens. In a global trade environment with a strong U.S. dollar, if the RMB loosely releases liquidity, it will be ruthlessly harvested by the U.S. dollar tide.

Every time the U.S. dollar becomes stronger in human history, there will be no good, either depression or war.

. With the emergence of a turning point in global liquidity, market risk preferences have changed. Highly valued risky assets may continue to be sold off. The stock market, bond market, foreign exchange market and digital assets are under pressure at the same time. The prices of various assets have recently changed rapidly. There has been some reaction to this.

From a practical point of view, except for China’s strict foreign exchange control management system, all financial markets, asset fields, and asset classes linked to the US dollar have the risk and possibility of inflation bubbles being punctured.

Generally speaking, the Federal Reserve's violent interest rate hikes and strong expectations of continued interest rate hikes will bring strong and continuous tightening threats and multiple fluctuation impacts to the global economy in an inflationary environment:

Short-term bubble bursting and volatility risks, The mid-term financial crisis triggers the risk of economic shock, and the long-term risk is continued recession and depression.

The economic crisis is essentially a debt crisis, and the expectation of US dollar interest rate hikes and the tightening trend may become the trigger for the global debt crisis.

Picture source: Toutiao Gallery

Written at the end:

Will RMB assets become "Noah's Ark" in the future global economic environment?

From the 1970s to the early 1980s, the United States suffered two consecutive oil crises, which led to the end of the Bretton Woods system and plunged the economy into a "stagflation" vortex.

The then Federal Reserve Chairman Volcker adopted an unexpected rate hike policy, which effectively curbed unexpected inflation.

But the price paid is the depression of the United States in a long-term stagflation environment, and getting out of the depression is not the recovery of the U.S. economy, but the success of the disintegration of the Soviet Union through the Cold War and through the Cold War dividends (essentially also financial plunder). Solving America's Depression Problem.

However, capitalism is cyclical. The debt risks accumulated by capital’s endless greed and desire for profit need to be released. Therefore, every few years, there will be a global systemic financial crisis and economic storm that will hit us.

From the Southeast Asian financial turmoil in 1997 to the subprime mortgage crisis in 2008, each performance was different, but the essence was the same.

The core problem is that the United States has the hegemony of the US dollar, but it does not have the ability to lead the global technological revolution and create increments. Therefore, it relies on military hegemony, technological monopoly, economic colonization and industrial chain management to repeatedly harvest and plunder The world's wealth is used to carry out the cyclical repair of the country's economy.

used to be invincible, but in 2022, this approach will no longer work.

Harvested Japan, South Korea, Southeast Asia, including our motherland China, this time face the huge economic hole dug by the huge amount of liquidity released by the United States since 2020, and they are unwilling and actually unable to fill it.

When the US dollar starts to raise interest rates, it starts a harvest cycle. Countries that do not have national strength and cannot be equal to the US military hegemony will not be able to escape.

Of course, since we accept the U.S. dollar and enjoy the dividends of the economic system dominated by U.S. dollar hegemony, this kind of harvest is also an inevitable result.

But China is different. In fact, the economic relations between China and the United States are more at the national level. Capital cannot flow in and out of China at will, and the military level has the right to speak. This makes China a key player in the dollar harvest cycle. Now, in the volatile environment of the global economy, it has become an absolute Noah's Ark.

The US dollar interest rate hike will have an impact on China's financial market and asset fields:

First of all, it is the financial market. If the US stock market falls, A shares will be under great pressure. However, the performance of A-shares, in the global stagflation environment, is crucial to global wealth and savings, and competition with the US stock market. China's A-shares are actually dominated by a visible hand, and the big A's are strong, especially when the US stock market is destined to go down. It is strengthening under the trend. To put it bluntly, it is grabbing global capital that was originally optimistic about the United States and cutting off the United States’ financial path!

This is an inevitable trend, but don’t rush it. China pays attention to being restrained and low-key, and making money quietly. It is very important to focus on this direction.

Secondly, after this interest rate hike, the RMB exchange rate will have depreciation pressure. The exchange rate war is an endurance competition between national destiny and economic fundamentals. If China wants to rise externally and revive internally, then there is a need and trend for the RMB to strengthen.

Japan can ignore morality and face, but China pays attention to morality and responsibility, so the exchange rate is under pressure and remains stable, which is also a reflection of the competitiveness of a major country.

Based on the judgment of the above two trends, under the background that the Federal Reserve has started to violently raise interest rates, which has impacted the global financial market and economic environment, China's domestic economic environment and RMB assets will become the upcoming global stagflation environment and huge economic shocks and fluctuations. Above the waves, there is an absolute "Noah's Ark".

Since June 15, we have been firmly optimistic about China’s domestic economy and RMB assets, as well as the trend of China’s A-shares.

does not necessarily guarantee any increase in wealth, but it is better to maintain the value without worry than to take risks in the turbulent and crisis-ridden US dollar asset market.

One is China, which has experienced hardships and tests, is tenacious and has upward momentum;

The other is the United States, which is suffering from internal and external troubles, internal capital groups competing for interests, and obvious decline.

For Chinese people, how to choose and bet may not be a very difficult multiple-choice question.

There is no need to denigrate the United States, or think that the analysis of the article and my intention are to denigrate the United States. A skinny camel is bigger than a horse. The family wealth and accumulation of the United States cannot be underestimated. We are not afraid of the extravagance and lust of the rich second generation, but we are afraid of the rich second generation. Generation blind entrepreneurship.

The United States, which has no way to treat the symptoms and root causes, cannot grasp the key points, is at the end of its rope, is going downhill by making blind moves, and does not feel sorry for itself when it sells its own land (dollar hegemony and technological and military advantages), and is on the path of continued decline and failure.

is good for the whole world. The reality is that everyone with a discerning eye knows that even if the United States maintains the hegemony of the dollar and suppresses inflation by raising interest rates and shrinking its balance sheet, the U.S. economy will not be able to escape a hard landing and inevitable recession this time.

As for the dog jumping over the wall, flipping the table and stretching his arms, Russia said that Ivan the Great is a magic weapon to protect his body, but what about China?

Could it be that the taste of in North Korea and Vietnam, after so many years, Yingjiang can't restrain its desire to taste it again?

The army and the people are united as one, let's see who can be the enemy in the world.

——Mao Zedong: " Miscellaneous Poems·Eight Lien Songs" (August 1, 1963)

The Dapeng rose with the wind in one day and soared ninety thousand miles.

Let him be turbulent, but I will remain calm.

China’s rise is unstoppable. Our countrymen are constantly striving for self-improvement and are not afraid of challenges and impacts.

As the United States raises interest rates, it is never China and the Chinese people that should worry, but the United States itself.

would like to share this article with all compatriots.

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