The results of the questionnaire released by the National Association of Business Economics on August 22 showed that 70% of respondents had no confidence in Feder reducing inflation to the target level without triggering a recession. The picture shows the price tag taken recently in a supermarket in Montebello, USA. Xinhua News Agency /Faith
Recently, with the Federal Reserve announcing hikes of by 375 basis points, raising the target range of the federal funds rate to between 3% and 3.25%, a new round of "interest rate hikes" has set off in the world. In order to curb inflation and stabilize the local currency exchange rate , many countries in the world have announced interest rate hikes.
In response to this, World Bank warned that the global "rate hike" will push the global economy to recession, especially developing countries will face a series of risks and "lasting harms".
"The world is trapped in a 'rate hike race'"
html On September 21, the Federal Reserve ended a 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%. This is the third consecutive rate hike of 75 basis points this year.'s "boots" landed, and other central banks responded. On September 22, the Swiss National Bank raised interest rates by 75 basis points beyond expectations, ending its eight-year negative interest rate policy. On the same day, the Bank of England and Norwegian Central Bank also announced a 50 basis point rate hike. After announcing the second rate hike this year in early September, European Central Bank President Lagarde said on September 26 that the ECB will continue to raise interest rates in response to the continued rise in inflation levels.
On September 28, local time, the Monetary Policy Committee of the Central Bank of Thailand announced a 25 basis point interest rate hike, from the original annual benchmark interest rate 0.75% to 1%, effective from now on. The day before, the Monetary Committee of the Hungarian State Bank (Central Bank) announced a 125 basis point rate hike, raising the benchmark interest rate from 11.75% to 13%, setting a new high in the country's benchmark interest rate since 2000.
In addition, central banks of South Africa, Philippines , Indonesia , Vietnam and other countries have also announced interest rate hikes recently. In the words of Ethan Harris, chief economist at Bank of America, , the world is in a "rate hike race".
This is not the first time that there has been a global "rate hike" since this year. In March this year, in order to cope with inflation , the Federal Reserve started a cycle of interest rate hikes, and has raised a total of 300 basis points so far, setting the largest intensive interest rate hikes since 1981.
Since the Federal Reserve and the US dollar dominate the global monetary market, most countries will regard the Federal Reserve's monetary policy as an important consideration when formulating their own monetary policies. The Federal Reserve has aggressively raised interest rates and the rapid shift in monetary policy has led to many countries being forced to follow the Fed hike rate hike in order to maintain macroeconomic stability.
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, setting the record for the widest global monetary policy tightening in 15 years.
"Compared with the previous period, a new round of global 'rate hike' has come more violently, because the Federal Reserve continues to aggressively raise interest rates, with a fast pace and large amplitude, which has caused severe turmoil in the international financial market." Bian Yongzu, a visiting scholar at Yale University in the United States, analyzed in an interview with our reporter.
USD "siphon effect" shows
"Multiple central banks have intensively announced interest rate hikes, one of the reasons is to deal with inflation. For example, the UK's consumer price index (CPI) rose 9.9% year-on-year in August, only a slight decline from 10.1% in July. The energy and food prices in euros also continued to soar, and the inflation rate in August reached 9.1% annually, setting a new record high." Feng Weijiang, Secretary-General of the National Global Strategy Think Tank of the Chinese Academy of Social Sciences, analyzed in an interview with our reporter that in addition, in the context of the United States being the first to significantly increase interest rates at a high frequency, other countries also have the consideration of passive interest rate hikes to deal with the risk of capital outflows.
Krishna Guha, head of central bank strategy at the US Everko International Strategy and Investment Group, recently pointed out that the United States is the decisive factor driving the global "rate hike". "The Federal Reserve is setting the pace of interest rate hikes and passing pressure to other central banks through the foreign exchange market."
Since the Fed launched a rate hike cycle this year, the US dollar exchange rate against other currencies has continued to rise, and accelerated around the Fed's rate hike node in September. The US " Wall Street Journal " reported that this year, the intercontinental exchange dollar index , which measures the exchange rate between the United States and major trading currencies, has risen 14%, the strongest year for the dollar since its launch in 1985. The euro, yen and pound sterling all fell to decades lows against the dollar, and emerging market currencies also suffered heavy losses.
"The Federal Reserve raises interest rates aggressively, and the spread between the US dollar and other currencies rapidly expands. In this case, other currencies depreciate rapidly, causing global capital to quickly return to the United States, which forces other central banks to raise interest rates urgently." Bian Yongzu said.
In addition, Feng Weijiang pointed out that the United States raises interest rates, the US dollar appreciates, and the rising prices of imported goods from the United States in other countries may exacerbate domestic inflation. In addition, the tightening monetary policy of the United States may compress external demand, and countries with the United States as the main market may face pressure to weaken export momentum.
"As the US dollar still dominates in international payment settlement, global foreign exchange transactions, and foreign exchange reserves, the Federal Reserve's monetary policy cycle has become a weather vane of the global monetary policy cycle. At present, as the Federal Reserve continues to raise interest rates, the siphon effect of the US dollar is emerging globally. The exchange rate ' scissors gap ' brought about by the strengthening of the US dollar is 'harves' global wealth through inflation." Zhang Monan, deputy director and researcher of the US and European Research Department of the China International Economic Exchange Center, pointed out to this newspaper that the continued interest rate hikes of the US dollar have brought the US dollar into a process of self-reinforcement, and the cumulative effect of the rapid appreciation of the US dollar has gradually become prominent. Against this background, many countries face the dual pressure of high inflation and a sharp slowdown in economic growth, and are trapped in stagflation. Many central banks followed the Federal Reserve's sharp interest rate hikes. In addition to controlling inflation, the more important reason is to cope with the depreciation of 's local currency and the violent turmoil in the foreign exchange market. hedges against the disturbances caused by the strengthening of US dollar to the global financial market.
Global recession risk increases
"The latest Fed's interest rate 'dot map' shows that the median forecast of Federal Reserve's federal funds rate by the end of 2022 is 4.4%, significantly higher than the 3.4% forecast in June. This means that the Fed may have to raise interest rates by 125 basis points this year. From a technical point of view, the Fed's interest rate hike decision is to control its high domestic prices. However, the US dollar's international monetary status determines the US dollar policy that does not consider the negative spillover effect , and it is born with the external effect of 'weaponization' or 'harvesterization' of currency." Feng Weijiang said.
At present, the Fed's aggressive interest rate hike has exacerbated market concerns about the global economic outlook. The US " New York Times " pointed out that the Federal Reserve's interest rate hike has caused inflation in many countries to rise rapidly, and the scale of debt has continued to expand, increasing the risk of a severe global economic recession.
The World Bank's research report in mid-September believes that global central banks are raising interest rates at a synchronous level that has not been seen in the past 50 years, and this trend may continue until next year, putting the world economy in recession.
"At present, the world economy is growing slowly, and the inflation and debts of many countries are both high. In this case, a sharp interest rate hike will not only increase financing costs, increase the burden on enterprises and the public, inhibit production and consumption, and lead to a decline in economic growth, but will also make the debt-invested governments face heavier fiscal pressure. At the same time, interest rate hikes have a major impact on the capital market. The economies of the United States and Europe may accelerate to enter a recession stage next year. It is not ruled out that some countries with relatively fragile economies may experience economic or financial crises." Bian Yongzu said.
Zhang Monan pointed out that the world is currently in a downward phase of a sharp slowdown in demand, and the Federal Reserve has entered a cycle of interest rate hikes, resulting in many countries being forced to adopt a tight monetary policy to further suppress already fragile demand. "The harm caused by the strong dollar to the world economy has just begun, and the negative effects will continue to appear in the next few years." The World Bank report pointed out that the current situation of central banks in various countries' fight against inflation is worrying. Since the Great Depression of in 1970, global economic development is in its worst slowdown. The decline in global consumer confidence has far exceeded that of previous global recessions.In this case, if the global economy suffers a minor blow in the coming year, it may lead to an economic recession.
"It is worth noting that there is a temperature difference between the current strong US dollar and the fragile domestic economic situation in the United States. The strength of the US dollar is not supported by its healthy domestic economic growth, but rather the turmoil of the Federal Reserve's monetary policy has caused turmoil in the world financial market, making the US dollar a strong safe-haven asset. The fragility of the US economy and its structural and stubbornness in domestic inflation determine that the US dollar cannot remain strong for a long time. Once the Federal Reserve's monetary policy adjusts later, the strong US dollar bubble will be punctured because the domestic economy is unable to support it, and the US dollar may experience a sharp decline. The resulting violent turmoil in the financial market may have a more serious spillover effect." Zhang Monan said. (Reporter Yan Yu)
