Under the stimulus of the Federal Reserve's continued interest rate hike policy, a strong dollar has become an indisputable fact, and a global "rate hike competition" is also underway.
In the interview, Tianmu News reporter learned that under this situation, the debt crisis of some developing countries in may be inevitable, and the pressure of global economic crisis is also increasing.
strong US dollar drives the global "rate hike competition"
On September 28, the dollar index soared to 114.71 at one point, setting a new high since May 2002. Although the US dollar index fell slightly afterward, it was still near its 20-year high.
As the US dollar index shows an upward trend, the strong US dollar has also caused the currencies of other countries to depreciate in disguise. Previously, Zhejiang Commercial Bank Chief Economist Yin Jianfeng said in an interview with Tianmu News reporter that the reason for the decline in the RMB exchange rate against the US dollar is not mainly due to the weakness of the RMB itself, but the relative strength of the US dollar, and the currencies of almost all countries have fallen against the US dollar. Behind the continued rise of the
USD index is the Fed's continued radical attitude towards raising interest rates. In March this year, the Federal Reserve started a cycle of interest rate hikes to deal with high inflation. It has so far launched five consecutive interest rate hikes, with a total of 300 basis points.
htmlOn September 21, the Federal Reserve ended its two-day monetary policy meeting and announced that it would raise the target range of the federal funds rate by 75 basis points to between 3% and 3.25%. Federal Reserve Chairman Powell reiterated his hawkish signal released in late August, which emphasized the Federal Reserve's determination to lower inflation and was wary of the serious consequences of premature easing monetary policy and allowing high inflation to solidify.Under high inflation pressure, the central banks of the world have to follow the pace of the Fed hike rate hiccups.
According to CCTV News, on September 22, the Bank of England announced a 50 basis point rate hike, raising interest rates to 2.25%, trying to curb inflation, which is the seventh time the Bank of England announced a rate hike this year. Previously, the Bank of England raised the benchmark rate by 50 basis points to 1.75% in August, the largest rate hike since 1995, while also raising the benchmark rate to its highest level since the 2008 financial crisis.
On September 20, European Central Bank Governor Lagarde said that the ECB will continue to raise interest rates, so that high inflation will not affect economic behavior and become a long-term problem. "The ECB needs to continue to normalize monetary policy and is ready to adjust interest rates as needed at any time to reach the medium-term inflation target of 2%," said Lagarde.
htmlOn September 22, the Swiss National Bank announced a 75 basis point interest rate hike, raising the policy interest rate from -0.25% to 0.5%, ending the negative interest rate policy that lasted for eight years; Norwegian Central Bank also announced a 50 basis point interest rate hike, raising the policy interest rate from 1.75% to 2.25%. From an Asian perspective, on September 22, the Philippines and the Indonesian central bank both announced a 50 basis point rate hike, and the Vietnamese central bank even announced a 100 basis point rate hike the next day.Bloomberg statistics show that since the beginning of this year, central banks in about 90 economies have raised interest rates, half of which have recorded a single increase of at least 75 basis points. This also set a record for the widest austerity of global monetary policy in 15 years.
World Bank warned the world economy to face severe situation
Xu Xiujun, director of the International Political Economy Research Office of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, told Tianmu News reporter that logically, when other central banks passively follow the pace of the Federal Reserve, the risk of world economic recession will increase significantly.
htmlOn September 28, the Bloomberg commodity spot index fell 0.13%, the lowest level since January this year. The index tracks futures contracts for various commodities, including oil, copper and wheat, and is a key indicator for measuring raw material prices. This reflects the pressure the Federal Reserve's monetary policy has put on the global commodity market.In addition, Brent crude oil futures recently fell below $85 per barrel for the first time since January, and WTI crude oil futures also fell to around $76 per barrel, the lowest level since January this year.
Brent crude oil futures and WTI crude oil futures price trends. According to Sina Finance
In addition, most basic metals fell, and futures markets such as Shanghai copper main force and Shanghai nickel main force also showed a continuous downward trend for many days.
Luo Zhiheng, chief economist and director of the research institute of Guangdong Securities, believes that the direct reason for the decline of commodities from prosperity is the reversal of global liquidity, and the fundamental reason is the switching of economic cycles. From the perspective of financial attributes, global liquidity tightening is an accelerator for the decline of commodities from prosperity to decline. First, there is a seesaw effect in the US dollar index and commodity prices, and the tightening of US dollar liquidity boosts the US dollar's strength and suppresses commodity prices.
"Not only that, the strong US dollar may also trigger a debt crisis in developing countries with a high proportion of foreign debt and poor economic fundamentals." Xu Xiujun said.
Tianmu News reporter saw on the official website of the World Bank that a research report released by the World Bank on September 15 showed that central banks in various countries have successively raised interest rates this year, and the synchronization level is unprecedented in the past 50 years, and this trend may continue until next year. However, the current expected rate hike trajectory and other policy actions may not be enough to reduce global inflation to pre-pandemic levels. Investors expect central banks of various countries to increase global monetary policy interest rates to nearly 4% in 2023, more than 2 percentage points higher than the 2021 average. According to the World Bank report, Tianmu News compiled
The report focuses on the extremely severe situation faced by central banks in various countries in fighting inflation today. Several historical indicators of global recession have been warned. The global economy is currently in its worst decline since its recovery since the 1970 recession. The decline in global consumer confidence has far exceeded the decline before previous global economic recessions.
The World Bank estimates that the world may move towards a global recession in 2023, and a series of financial crises that are sufficient to cause lasting harm in emerging markets and developing economies.
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(Source: Tianmu News)
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