The Federal Reserve is about to hold a interest rate meeting. It is expected that the meeting will still raise interest rates by 75 points, bringing the US benchmark interest rate to 3.25%, and may exceed 4% by the end of the year, or even reaching the level of 5%. Judging from the news from the Federal Reserve, the main consideration is economic data. One is the change in inflation level, and the other is the changes in economic data such as consumption and employment. In the short term, US inflation will still be at a high level, and even if there is a decline, it will not be very large. This further supports the Federal Reserve's expectation that the Federal Reserve will continue to raise interest rates by 75 points. This meeting is before the inflation data, so its forward-looking nature is more eye-catching.
US inflation in July fell from 9.1% in June to 8.5%. This change is very obvious. If the inflation turning point appears, then US inflation will be controlled. The initial purpose of the Federal Reserve's interest rate hike is basically achieved. But the problem is that one is that inflation may still rise stubbornly, and it depends on the August inflation data; the other is that even if the inflation turning point appears, it is a long-term process to let inflation return to 2%. During this period, the Federal Reserve still needs to continue raising interest rates to consolidate, so in any case, the Federal Reserve continues to raise interest rates. The key is whether it will continue to raise interest rates by 75 points.
UK inflation officially exceeded 10% in July, reaching 10.1%. It was the first time for the United States, Britain, and Europe to cross the 10% hyperinflation threshold. Eurozone inflation reached 8.9%, which also hit a new high. As the European and British inflation continued to steadily spiral upward, it was difficult for US inflation to decline alone. If US inflation declined, it should be reflected in the data of the European and British. The problem now is that the inflation data of the European and British in July is stubbornly rising, which depends on the inflation data in August. Before the Fed's interest rate hike was released, this undoubtedly tests the Fed's forward-looking nature, which can be seen from the extent of the Fed's interest rate hike.
Global energy prices have fallen, international crude oil fell to around US$90, and food prices have also fallen significantly. These are conducive to the easing of global inflation and even a turning point. However, the problem is that the trend of rising domestic prices in the United States, Britain and Europe has formed and continued, and it is difficult to have a systemic turning point in a short period of time. Therefore, US inflation may still recur, that is, it may rise again. In this way, it will not only support the Federal Reserve's sharp interest rate hikes, but also reflect that the Federal Reserve will have more times. It is not ruled out that it will be until the end of the year, when the US benchmark interest rate may exceed 4%.
From the perspective of US stocks, there has been a sharp plunge, reflecting the stubbornness of inflation and the trend of the Fed's interest rate hike in advance. This means that the stock market still accepts rising prices rather than a real turning point. Therefore, the inflation data issued by the Fed after the interest rate hike may still disappoint people and may still make the market believe that the pace of the Fed's interest rate hike will be more sustained. Judging from the economic data of the US-EU-UK linkage, it does not support the decline in the US alone inflation, while the EU-UK inflation continues to stubbornly rise. Therefore, the Fed's interest rate hike is basically 75 points.
Recently, the US dollar index was significantly supported by the Fed's interest rate hike expectations, and showed a significant rebound and upward attack. It is expected that before and after the Fed's interest rate hike, the US dollar index will try to break through the 110 mark, setting a new high in recent years. The euro fell below parity against the US dollar again, reflecting the basic trend of non-US currencies weakening again. Affected by the Fed's interest rate hike, the US dollar will rise strongly, while non-US currencies may continue to fall, and even hit a new stage low. This trend may continue until the end of the year, when the US dollar index will try a new high and is very likely to be around 120.
