Federal made a rate hike in May meeting statement: Federal hike 50 basis points, raising the federal funds rate from the current 0.25%-0.5% to 0.75%-1%.
This is the first time the Federal Reserve has raised interest rates by 50 basis points since 2000, twice the rate hike in March! Set a record for 20 years.
At the same time, the Federal Reserve also announced at the meeting that it would carry out " balance sheet reduction " and "reduce the Federal Reserve's balance sheet"
( Why did the US stock rise sharply)
So why did the US stocks rise sharply as soon as the news came out, and it went down the next day?
Since March, the US CPI index has reached 8.5%, seriously exceeding market expectations. Therefore, under the high inflation pressure, the Federal Reserve is forced to suppress inflation through a large rate hike.
According to estimates, the United States will continue to raise interest rates this year, with a total of 225 basis points, which means that we will usher in a 150 basis point interest rate hike this year.
Of course, this rate hike is within the market's expected range. After all, before the meeting, many people thought that Powell might have aggressively raised interest rates by 75 basis points.
So after the news came out, the financial market responded quickly. The U.S. stock market began to rise and eventually closed with a big rise.
Theoretically, the sharp interest rate hike of the Federal Reserve will lead to the accelerated return of the US dollar to the United States, reducing funds in the market, and affecting the interest rate of US bonds and , thereby reducing the valuation of US stocks and causing the US stock market to fall.
But in the market's view, the 50 basis points increase this time is already "in expectations". The US stock market fell so badly a few days ago, which is already a "bad" caused by the interest rate hike in advance.
So this time the Fed did not raise interest rates by 75 basis points, Wall Street is already burning incense. Moreover, after announcing the rate hike, Powell also spoke: saying that the Fed did not consider the possibility of a single rate hike of 75 basis points, which also blocked the market's expectations for a 75 basis point increase.
This is a major benefit to the US stock market! So as soon as Powell finished speaking, U.S. stocks began to rise sharply.
In addition to the positive aspects of interest rate hikes, more importantly, the scale of "balance sheet reduction" announced this time with interest rate hikes is lower than expected.
What is table shrinkage? Simply put, the essence of balance sheet shrinking is to "pump" from the market and reduce inflation by recycling dollars in the market . The Federal Reserve's adjustment of the amount of base currency through tightening its balance sheet is a measure to withdraw from loose measures and is a tightening policy.
This time, the Federal Reserve announced that it will shrink its balance sheet at a rate of US$47.5 billion per month starting from June, while the previously estimated balance sheet shrinkage is about US$95 billion.
As we all know, the Federal Reserve's balance sheet: up to $8.93 trillion! When the balance sheet reduction and interest rate hike are implemented together, the power of interest rate hikes can be amplified, so this is a combination of federations to deal with inflation.
is 47.5 billion and the other is 95 billion. This means that the US balance sheet shrinkage is very conservative and much lower than market expectations. This is obviously a good thing for the stock market! This has led to a situation where the stock market not only did not fall but rose sharply after the US rate hike.
So you see, there were two negative factors: interest rate hike and balance sheet reduction. As a result, due to Powell's superb "speaking art", not only did the negative factors of interest rate hike and balance sheet reduction be perfectly implemented, but the US stock market also rose sharply. Can play!
(the impact of interest rate hike and balance sheet reduction)
So what is the impact of US interest rate hike and balance sheet reduction?
1. The US interest rate hike is likely to trigger an exchange rate crisis
0 The US interest rate hike will cause international capital to sell currencies of other countries and return to the United States to purchase dollar assets, which will cause the dollar to strengthen, while the currencies of other countries will weaken. The United States relies on this to "harvest".
So we can see that the Japanese yen and RMB have depreciated significantly in recent times, which is exactly one of the consequences.
RMB exchange rate depreciated from 6.3 to the highest 6.69.
Of course, both China and Japan are relatively powerful economies . The general degree of interest rate hike has limited damage and impact on us (China), but other small countries are not that good.
In the last round of interest rate hikes, Türkiye and Argentina were completely defeated, the currency depreciated significantly, the money in the hands of the people became waste paper, and the country's wealth was swept away by US dollar capital.
Although China is relatively strong, the Federal Reserve's continued interest rate hike will lead to the continued increase in pressure on the depreciation of the RMB exchange rate. This year's RMB exchange rate may be underway in the continuous depreciation.
This time, the hike of USD interest rate hike has just begun. Who will collapse due to the USD hike this time? Leave your answer in the comment section.
2 will slow down the pace of China's reserve requirement ratio cuts or interest rate cuts
Recently, China's economy has encountered some difficulties. In order to stimulate the economy and give market confidence, the central bank will generally adopt a loose policy of lowering the reserve requirement ratio or interest rate cuts as a response.
But when the Fed raises interest rates, the interest rate gap between China and the United States becomes smaller, which leads to the limited interest rate cut by the central bank.
For example, assuming that the United States does not raise interest rates, we can cut interest rates three times, but after the United States raises interest rates, our rate cut rate is only 1 time.
If we force interest rate cuts more than 2 times, it will lead to the "interest rate gap" between China and the United States, which will become unfavorable to the Chinese economy. This kind of interest rate cut is meaningless.
3. The US rate hike causes A shares under pressure
After the US rate hike, it will cause US stocks to fall, and the decline in US stocks will be transmitted to A shares, thereby affecting the trend of A shares. . Alas, I understand everything.
Of course, the trend of A-shares is ultimately closely related to domestic policies. As long as you give enough favorable benefits, A-shares can also counterattack and rise for you.
(impact on my country)
In general, the Fed's meeting is expected and there are surprises. The expectation is that the Fed's 50 basis points rate hike has been guessed by the market, but the surprise is that the balance sheet shrinkage is not as good as expected, and the "dove" behavior brought about by Powell's concerns about the US economy.
. For China, the Federal Reserve's interest rate hike at this time is not a good thing, because the interest rate hike will lead to a large depreciation of the RMB exchange rate. This phenomenon has been reflected in the recent trend of the RMB exchange rate .
More importantly, the Federal Reserve's interest rate hike will lead to foreign capital flow out of China, thereby curbing China's economic development, which is undoubtedly a worse problem for China.
(China needs to stabilize the economy)
The United States cannot stop the pace of interest rate hikes for China. Even in the next few months, the United States will raise interest rates by 150 basis points one after another to cope with inflation. We will also face even greater impacts and challenges.
Our response has also begun. The central bank and the Shanghai and Shenzhen Stock Exchanges have expressed that they will study and implement the prevention of financial risks, further effectively manage financial risks, and resolutely defend the bottom line of preventing systemic financial risks.
