US Federal Reserve Board decided to continue aggressively hikes days ago to push the dollar against other currencies exchange rate hikes , causing turmoil in the international financial market.
International Observation people believe that driven by US monetary policy, the continued strengthening of the US dollar is having a destructive impact on the global scale. Taking monetary policy and exchange rates as important tools, the United States has continuously pushed up global inflation and debt levels with the help of the hegemony of the US dollar, squeezed the monetary policy space of various countries, and pushed the world economy to recession by driving the wave of global austerity.
affects the exchange rate and pushes up the inflation level of other countries
Federal Since the interest rate hike cycle started in March this year, the exchange rate of the US dollar against other currencies has continued to rise, and has accelerated around the US rate hike node in September.
On September 22, the yen exchange rate against the US dollar once approached the 146-1 mark during the session, hitting a new low in 24 years, prompting the Japanese Ministry of Finance to announce intervention in the foreign exchange market to prevent the yen from further depreciating. This is the first time that the Japanese government has intervened in the foreign exchange market since June 1998. The yen has depreciated by about 25% against the US dollar this year.
On the same day, the Korean won against the US dollar fell below the 1400-1 mark during the session, setting a record low since March 31, 2009.
According to the US " Wall Street Journal ", this year, the intercontinental exchange dollar index , which measures the exchange rates between the United States and its major trading partners, 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.
analysts believe that the exchange rate " scissors gap " brought about by the strengthening of the US dollar is "harvest" the world through inflation. Whether it is developing countries or other developed countries, once the local currency depreciates against the US dollar, the cost of importing bulk commodities , denominated in US dollars, will inevitably increase, aggravating its own inflation; for the United States, importing goods from other countries becomes cheaper, and the appreciation of the US dollar has become one of the means to alleviate domestic inflation.
△A European city street
Taking the euro zone as an example, the inflation rate in August reached 9.1% at an annualized rate, far exceeding the 2% medium-term inflation target of the European Central Bank. Nine of the 19 member states in the euro zone have inflation rates of double digits per year. After the euro depreciated against the US dollar, Europe imported raw materials and semi-finished products denominated in US dollars at higher prices, under the inflationary pressure transferred by the US.
The Wall Street Journal commented: "In terms of curbing inflation, the strong dollar has brought good winds to the United States, but has put pressure on other parts of the world."
set off a wave of interest rate hikes, deepening expectations of recession
Under pressures such as intensifying inflation and depreciating the local currency of , many countries have to follow the pace of the Federal Reserve and raise interest rates. In the words of Ethan Harris, chief economist at Bank of America, the world is in a "rate hike race".
△U.S. Federal Reserve Building
Before and after the Federal Reserve hike, Sweden, Swiss , the United Kingdom and South Africa all raised interest rates sharply. Among them, the Swiss National Bank's interest rate hike marks the end of the 10-year negative interest rate era in Europe, and Japan has become the only major economy to maintain a negative interest rate policy.
In November last year, ECB President Christina Lagarde claimed that the euro zone interest rate is unlikely to rise in 2022, and this month the ECB announced its second rate hike this year, with a 75 basis points hike the largest rate hike since the launch of the real euro currency in 2002.
In Asia, the central banks of the Philippines and Indonesia both announced a 50 basis points rate hike on the 22nd, and the central bank of Vietnam announced a 100 basis points rate hike on the 23rd.
Bloomberg statistics show that since the beginning of this year, the central bank of about 90 economies has 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. Krishna Guha, head of central bank strategy at the Everko International Strategy and Investment Group in the United States, believes that the United States is the decisive factor driving the global interest 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."
International observers believe that the Fed has shown that it will curb inflation at all costs and realize the interests of the U.S. economy.As other central banks passively follow the Fed's pace, the risk of a world recession has also increased significantly.
International Monetary Fund Former chief economist Maurice Obstfeld believes that most central banks are moving in the same direction and may strengthen their austerity policies from each other, which exacerbates the risks.
△World Bank Headquarters
The research report released by the World Bank 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. This trend may continue until next year, putting the world economy into recession and causing financial crisis to emerging markets and developing economies, causing lasting damage.
In the words of former Fed Director Kevin Wash, "All the conditions for the world's economic recession are already in place."
Liquidity increase, exacerbating global debt risks
Debt risk is another important manifestation of the global harm of US dollar hegemony. The sharp turn of the Federal Reserve's monetary policy has led to a significant tightening of global liquidity, and the preference for borrowing has shifted from stimulus to restriction, and capital has begun to flow back to the United States, while many emerging economies that are already heavily in debt have difficulty withdrawing from debt.
△U.S. Treasury Secretary Yellen
U.S. Treasury Secretary Yellen previously admitted that the appreciation of the dollar may pose challenges to emerging economies, especially those with large amounts of dollar-denominated debt.
Ragulam Rajan, professor of finance at the University of Chicago Booth Business School, said that under the factors of low interest rates and the COVID-19 pandemic, many countries have increased a large amount of debt in the past two years, and the risks are now difficult to control.
Federal interest rate hike , the yield on the 10-year U.S. Treasury bond, which is the key benchmark for global lending costs, soared to 3.69%, the highest level since 2011. The latest data from the International Finance Association shows that emerging economies will have $83 billion in government debt due by the end of next year. After the dollar strengthens, the dollar debts borne by governments and businesses in emerging economies will be more expensive.
World Bank chief economist Indmit Gill warned in an interview with the UK's " Financial Times " that debt risks in emerging economies are particularly prominent. Some low-income countries are more vulnerable than before the international financial crisis and may fall into debt amid the global austerity wave.
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