Last night, the global market had a sleepless night!
In the early morning of the 16th, Beijing time, the Federal Reserve raised its benchmark interest rate by 75 basis points to a range of 1.50%-1.75%. The rate hike was the largest since 1994.
As soon as the news came out, the financial market was the first to react, 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 rose by 7% within half an hour after the news was issued. …
Some analysts pointed out that in the short term, we still need to be wary of the sharp fluctuations in the economic and financial markets caused by the acceleration of interest rate hikes and balance sheet reduction . The stock, bond, and currency markets may resonate, but at present, my country’s inflation is moderate and controllable, and the monetary policy remains There is space.
Powell: 75 basis points will not become the norm
On June 16, the Federal Reserve announced that it would raise the federal funds rate target range by 75 basis points to a level of 1.5%-1.75%, thus ushering in the largest single interest rate increase in 28 years. , highlighting the urgency of the Federal Reserve's aggressive tightening of monetary policy.
Compared with the previous statement that "with the appropriate tightening of the stance of monetary policy, the Committee expects inflation to return to the 2% target and the labor market will remain strong", this time the Fed emphasized in the resolution statement that it is firmly committed to As the inflation rate returns to the 2% target, it will continue to reduce its holdings of U.S. Treasury bonds, agency debt and agency mortgage-backed securities.
At a regular press conference, Federal Reserve Chairman Powell said that curbing inflation is still the Fed's top priority. It is expected that it is still possible to raise interest rates by 50-75 basis points next time, but this kind of rate increase will not become the norm. . The U.S. economy is fully prepared to raise interest rates, and the Federal Reserve will remain flexible in formulating monetary policy and will not try to trigger an economic recession.
"New Bond King" Gundlach said, "I don't take the Fed's forecast seriously. It's stupid to believe that the inflation rate will drop to 2%. Bond market liquidity is deteriorating. I expect the Federal Reserve to close this summer. The Fed will raise interest rates further and the possibility of a soft landing is very low. If the next recession comes, the Fed will soon cut interest rates to zero.
The impact on the stock market, foreign exchange market and bond market. Different
Based on the transmission effect of global financial markets, the Federal Reserve's aggressive interest rate hikes have also attracted industry attention to the trends in domestic financial markets. What impact will it have on domestic stock markets, bond markets, foreign exchange markets and other trading markets? On June 16, reporters from Beijing Business Daily also conducted extensive inquiries.
Compared with the volatile market of US stocks , since April 27, A shares have bottomed out and rebounded independently. On June 15, the Shanghai and Shenzhen stock markets fluctuated and closed up. Before the close, there was a price drop, which was also considered to be a sign of concerns about the outcome of the Federal Reserve's interest rate meeting. On June 16, the three major A-share stock indexes opened slightly higher, with the Shanghai Stock Exchange Index rising 0.04%, the Shenzhen Component Index rising 0.07%, and the GEM Index rising 0.03%.
"The Fed's interest rate hike and balance sheet reduction are mainly in response to high inflation in the United States, and have little impact on the A-share market. In addition, the U.S. stock market is at a historical high valuation, and the A-share market is near the bottom of historical valuation. Two market positions Different, this also means that the U.S. stock market may experience a sharp decline this year," Yang Delong, chief economist of the Qianhai Open Source Fund, said in an analysis.
Based on the above background, Yang Delong believes that from the comparison of the economies of China and the United States, the U.S. economy may be at risk of recession due to the Fed's interest rate hikes and balance sheet reduction, while China's economy will recover after the central bank moderate easing and active growth stabilization policies are gradually implemented. up.The economic growth trend throughout this year should be low at first and then high. bottomed out in the first and second quarters and picked up in the third and fourth quarters. This is also a basis for the strengthening of the capital market.
Huaan Securities pointed out that domestic and external epidemic tightening disturbances still exist, but with profit support and policy guarantees, the market is expected to fluctuate upward. The biggest support for A-shares in the second half of the year comes from the substantial improvement in corporate profits as growth bottoms out. The strong support of internal profits and the policy of stabilizing growth throughout the year are expected to drive the market upward.
In the foreign exchange market, as news about interest rate hikes came out one after another, the offshore RMB, which has been trading continuously, soared sharply against the US dollar , once rising by more than 800 basis points, hitting the largest increase since 2017. June 16 , the central parity rate of the RMB exchange rate against the U.S. dollar sharply appreciated by 419 basis points in a single day after four consecutive days of depreciation. The onshore and offshore RMB exchange rates against the U.S. dollar both fluctuated around 6.69.
"The impact of the Fed's tightening policy on other countries' monetary policies and capital markets mainly takes effect by increasing the cost of the U.S. dollar and suppressing U.S. dollar liquidity." Wang Hao, a macroeconomic researcher, explained. Wang Hao pointed out that the Federal Reserve's interest rate hikes and balance sheet reduction will increase the cost of U.S. dollar borrowing, causing overseas leveraged funds to use low-interest U.S. dollar loans to convert into high-interest national currencies, thereby increasing the cost of arbitrage transactions in the capital markets of high-interest countries and lowering yields. Or even lose money, thereby exchanging U.S. dollars and exiting the high-interest-rate national capital market. The result is usually fluctuations in the capital markets of countries with high interest rates, and the exchange rate is under depreciation pressure.
Wang Hao said that the interest rate spread of the U.S. 10-year Treasury bond dropped from the normal comfortable range of 80-120 basis points to an inversion of more than 50 basis points, and the domestic capital market and the RMB exchange rate were under greater pressure than before. However, judging from the current situation, domestic economic recovery prospects, export resilience and the relative allocation value of A-shares have become the main factors maintaining strong short-term demand for the RMB. This not only allows the RMB exchange rate to stop its downward trend in the short term, but also provides valuable space for domestic monetary policy to "focus on me."
In terms of the bond market, Wang Hao believes that macroeconomic fundamentals in the second half of 2022 will limit the room for further declines in interest rate bond yields. Subsequent unfavorable factors are increasing, and the probability of user investment income declining is correspondingly higher. On the one hand, economic growth may have passed its trough, and there is a high probability of recovery in the future. On the other hand, the growth rate of fixed asset investment is expected to pick up, while raw material prices may remain high.
In the view of ICBC InternationalChief Economist Cheng Shi, in the short term, we still need to be wary of the dramatic fluctuations in the economic and financial markets caused by the acceleration of interest rate hikes and balance sheet reduction, and the stock, bond, and currency markets may resonate. As global liquidity turning points emerge, market risk preferences change, and highly valued risky assets may continue to be sold off. The stock market, bond market, foreign exchange market and digital assets are all under pressure at the same time. The recent rapid changes in various asset prices have There has been some reaction.
Does the Central Bank of China follow ?
Many analysts said that overall, the domestic financial market will still maintain a "domestic-focused" trend, and it is also necessary to pay attention to external factors. A reporter from Beijing Business Daily noticed that since 2022, central banks in many countries have started or accelerated the process of raising interest rates. On June 16, in addition to the Federal Reserve, there were also interest rate decisions held by Brazil , Switzerland and the Bank of England.
In response to the issue of overseas economies, especially the Federal Reserve's interest rate hikes, regulators have repeatedly stressed that the overall domestic economic operation remains within a reasonable range and that the economy is relatively resilient and has the foundation and conditions to adapt to this round of Fed policies. Adjustment.
At the press conference on foreign exchange receipts and payments data for the first quarter of 2022 held on April 22, Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, pointed out that based on historical experience, the Fed’s monetary policy adjustments, especially interest rate increases, usually It will have a spillover impact on cross-border capital flows across countries. However, those that have been hit harder are mainly economies with shortcomings and weaknesses in their fundamentals.
In addition, in the past few months, my country's medium-term lending facility (MLF) has been continuously renewed in equal amounts, and the winning rate has remained unchanged for 5 consecutive months.. On June 15, in order to maintain reasonable and sufficient liquidity in the banking system, the central bank launched a 200 billion yuan medium-term lending facility (MLF) operation and a 10 billion yuan open market reverse repurchase operation, with the winning bid rates remaining unchanged.
Cheng Shi pointed out that in recent years, central banks have generally considered adjustments to overseas monetary policies when formulating monetary policies, and the Federal Reserve is expected to follow a short-term accelerated tightening path. If interest rates are raised to 2%-2.5% in the fourth quarter, even high inflation will not If the economy is restrained, the Fed will also hold off on raising interest rates due to the possibility of a potential recession. Therefore, although the possibility and necessity of lowering MLF interest rates in the short term is low, there is still the possibility of a small interest rate cut and reserve requirement ratio reduction in the second half of the year against the backdrop of the Fed's slowing down of interest rate hikes and efforts to stabilize fiscal growth.
Wen Bin, chief researcher of China Minsheng Banking , further emphasized that the Fed's tightening of monetary policy has brought spillover benefits, exacerbating the volatility of the international financial market. The U.S. dollar index has continued to strengthen, causing some emerging market economies with fragile economic structures to face economic recession. Risks of currency devaluation and debt crisis. At present, my country's inflation is moderate and controllable, and there is still room for monetary policy. At present, we should continue to give full play to the dual functions of monetary policy tools in terms of total volume and structure, encourage and guide financial institutions to continue to increase support for the real economy, and effectively reduce the real economy. Economic financing costs.
"Follow-up domestic monetary policy will still focus on 'stable growth' of the domestic economy. The situation of reasonably abundant liquidity will not change, and the main interest rates in the money market will remain at a low level. The gradual effect of various measures will drive the growth of credit balances and Social financing The growth rate has further picked up. Structural monetary policy tools are expected to play a greater role in the second half of the year, and the central bank may further cut interest rates to promote financial services to better serve entities.
source丨Beijing Business Daily (reporters Tao Feng, Zhao Tianshu, Liao Meng), CCTV Finance, Financial Associated Press
Picture source丨People's Bank of China, China Foreign Exchange Trading Center screenshots, China Business Network video screenshots, Visual China, One Picture Network, wind
