On October 13, U.S. Bureau of Labor Statistics released data showing that the US CPI in September rose 8.2% year-on-year, higher than the market expectations of 8.1%, and the previous value of 8.3%; the September CPI rose 0.4% month-on-month, higher than the market expectations of 0.2% and the previous value of 0.1%. After excluding the volatile food and energy prices, 's core CPI rose 6.6% year-on-year in September, , higher than the market's expectations of 6.5% and 6.3% of the previous value. hit the highest since August 1982; core CPI rose 0.6% month-on-month, 0.4% higher than the market's expectations of 0.4%, and remained the same as the previous value.
Source: wind client China Merchants Securities
US CPI data continues to be high, making the market worried that Fed rate hikes will not slow down. At present, the Federal Reserve has raised interest rates by 275 basis points in three consecutive times in June, July and September, and the "eagle" faction is still firm in raising interest rates.
The continued and stubborn inflation in the world has made more central bank policy decision makers accelerate the pace of tightening monetary policy. In addition to the Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, and many developed economies such as Sweden have launched interest rate hike model -type .
Judging from the current situation, most central banks that choose to raise interest rates have chosen the former between fighting inflation and promoting economic recovery. This means that under the joint influence of the new crown pneumonia epidemic, the Russian-Ukrainian conflict and the increase in global interest rates, the global economic slowdown is already a high probability event. More importantly, the actions of developed economies to synchronize and significantly tighten monetary policies have further brought greater risks to global economic growth. , including International Monetary Fund (IMF) and World Bank , have issued warnings that the global economy will slow down.
01 Developed economies are constantly raising interest rates
In the past September, many central banks of developed economies have made decisions to raise interest rates. The Federal Reserve raised interest rates by 75 basis points, raising the target range of the federal funds rate to 3% to 3.25%. The ECB announced a hike of 75 basis points in September. This is the second time the ECB raises interest rates this year after 50 basis points in July, and the rate hike rate has further expanded. In addition, the Swedish central bank also raised interest rates by 100 basis points beyond expectations, announcing that it would increase the benchmark interest rate from 0.75% to 1.75%. The Bank of Sweden has become another central bank that chooses to raise interest rates by 100 basis points after the Bank of Canada.
Judging from the current statements of major central banks, in order to fight the still high inflation level, the "eagle" interest rate hikes will continue. The report released by the Organization for Economic Cooperation and Development showed that the inflation rate in August was 10.3%, basically remained stable compared with the previous two months. The overall inflation rate in 16 of the 38 member countries decreased, and the inflation level in 15 countries was still at a high level, among which Estonia , Latvia , Lithuania and Turkey have the most serious inflation.
Regarding the future monetary policy trends of central banks in major developed economies, Fang Ming, director of the Global Financial Strategy Laboratory and chief researcher of Southwest University of Finance and Economics, said in an interview with the Financial Times that the Federal Reserve's September consumer price index (CPI) is still around 8%. After a sharp interest rate hike of 300 basis points, the US non-agricultural employment data in September shows that the economy is still relatively resilient. After the seasonal adjustment in September, the non-agricultural employment population increased by 263,000, and the unemployment rate in September was only 3.5%. The risk of recession seems to be controllable. Given that inflation levels are still high, the Fed's interest rate hike in early November may be between 0.5% and 0.75%.
" Generally speaking, the factors that affect the Fed's decision to raise interest rates mainly include four aspects: first, inflation level; second, economic growth or recession situation; third, employment market situation; fourth, the stability of the financial market. However, given that the United States usually uses the global dollar cycle to promote the flow of global funds, the appreciation of the dollar and the return of global funds in the United States are also a major decisive factor, but also a hidden factor." Fang Ming said.The latest minutes of the Fed's September monetary policy meeting showed that Fed officials agreed to raise interest rates to a more restrictive level, and then stay there for a while to achieve its goal of reducing inflation. Several of the members of the meeting stressed that historical experience shows that it is dangerous to end the deflationary monetary policy cycle aimed at reducing inflation.
In addition, the ECB officially started hikes in July this year, but the double-digit inflation level is forcing the ECB to make a more radical decision . Data released by the European Statistics Office on September 30 showed that it is expected that the euro zone html will reconcile the consumer price index (HICP) year-on-year growth will reach 10% in September. The year-on-year growth rate of core HICP after excluding energy and food prices in September was 4.8%, higher than 4.3% in August.
On the issue of whether the ECB's interest rate hikes can keep up with the Fed, Fang Ming believes that the ECB's interest rate hikes will follow the Fed, but may not reach the Fed's interest rate hikes and interest rate height. "The ECB announced a 75 basis point interest rate hike in September, which is the largest interest rate hike in the European Central Bank since the establishment of the euro zone, far exceeding market expectations. It is expected that the ECB will continue to raise interest rates at a pace of 75 basis points. The ECB's main refinancing rate was 1.25% after two interest rate hikes, while the Federal Reserve's target interest rate has reached 3.25% after experiencing five interest rate hikes since March 2022. The inflation levels of the two are relatively similar, and both try to reach the 2% inflation control target, and the Federal Reserve's willingness to raise interest rates has not declined." Fang Ming said.
02 The global economic slowdown alarm is frequently heard
The action to tighten monetary policy to fight high inflation is urgent, but the risks of the economic downturn that follows cannot be ignored. Recently, multiple international institutions have issued warnings on the risk of a global economic slowdown. In the "Trade and Development Report 2022" released a few days ago, the United Nations Conference on Trade and Development issued a warning about the policy-induced global recession. According to the forecast of the United Nations Conference on Trade and Development, the global economy will grow by 2.5% in 2022 and the economic growth rate will slow to 2.2% in 2023.
"In the 10-year ultra-low interest rate period, many central banks have never achieved inflation targets and have not promoted healthier economic growth. Any idea that they will be able to lower prices by relying on higher interest rates without creating recessions is an uncautious gambling. Excessive monetary tightening may bring a period of stagnation and economic instability to many developing countries and some developed countries in the face of decline in real wages, fiscal tightening, financial turmoil, and insufficient multilateral support and coordination. The sharp rate hike in the United States this year is estimated to reduce future incomes of developing countries (excluding China) by about $360 billion and predict more trouble in the future." The UNCTAD proposed.
"In order to cope with the global geopolitical tension and the previous extremely loose monetary policy of , the price surge in commodities and the rebound in demand after the epidemic, developed economies such as Europe and the United States and some emerging market economies tightened monetary policies simultaneously, which may usher in economic stagnation or recession while the world is facing greater inflationary pressure, that is, a situation of 'stagflation' . What is more important is that developed economies represented by the Federal Reserve are developed. The central bank's sharp interest rate hike has led to a revaluation of the value of global financial markets, including the stock market, bond market and exchange rate market. Moreover, as the appreciation of the US dollar, it will lead to the flight of funds in emerging markets and the sharp depreciation of currencies, which may cause a serious financial crisis. The appreciation of the US dollar also puts commodity prices facing a downward trend. Under this circumstance, financial markets and financial institutions in developed countries will be greatly turbulent, and the real estate market will also be deeply affected. There may be a new type of Great Depression that combines a global financial crisis and an economic recession." Fang Ming emphasized.
In addition, in the latest World Economic Outlook report released in October, the IMF maintained the forecast value of global growth this year's global growth rate unchanged at the level of 3.2%. But at the same time, the forecast for next year was lowered to 2.7%, 0.2 percentage points lower than the forecast for July.In 2023, the world will experience a large-scale slowdown in economic growth, and countries that account for about one-third of the global economy will experience economic contraction this year or next year. IMF stressed that despite the slowdown, inflationary pressures are wider and longer than expected. is currently expected to see global inflation reach a maximum of 9.5% this year and will drop to 4.1% in 2024.
However, in the IMF's view, the risk of high inflation is more urgent than the risks brought to the global economy by tightening monetary policy. "Over-tightening of monetary policy may push the global economy to an unnecessary serious recession. Financial markets may also find it difficult to withstand too fast policy tightening pace. However, the cost of these policy mistakes is not symmetric. If central banks misjudgment the stubbornness of inflation again, their hard-won credibility may be weakened. In this case, the future stability of macroeconomic will be much more damaged. If necessary, countries should maintain market stability through financial policies. But central banks need to implement monetary policies calmly and focus on suppressing inflation." The IMF said.
Source: Financial Times Securities Times Network
Reporter: Liu Yanchunzi
Editor: Yu Jiaxin Li Liujia Han Shengjie
Proofreading: Li Liujia
Email: [email protected]
