The "boot" has landed. Recently, the US dollar has finally raised interest rates, raising the target range of the federal funds rate by 25 basis points to between 0.25% and 0.5%. This is the first rate hike since December 2018.

Author: Li Yunfei | Source: Original

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"boot " has been implemented. Recently, the US dollar finally raised interest rates by , raising the target range of federal funds rate by 25 basis points to between 0.25% and 0.5%. This is the first rate hike since December 2018. What impact will the US dollar raise interest rates have on China?

First of all, why should the US dollar raise interest rates?

Let’s first look at a set of data: in February, the United States, CPI increased by 7.9% year-on-year, and the core CPI increased by 6.4% year-on-year, the highest level in the past 40 years, and the 10th consecutive month of the year-on-year growth rate of US CPI exceeded 5%.

The current inflation rate in the United States has remained high, which has had a serious impact on the US economy and life. With inflation still high, the United States needs to take rate hikes and fight inflation by adjusting its balance sheet.

USD interest rate hike will have on my country?

1, causing the depreciation of the RMB.

Generally speaking, a US dollar interest rate hike will lead to a depreciation of the RMB. It can be simply understood that after the US dollar rate hike, more people will be willing to hold the US dollar. Because obtaining the equivalent US dollar will pay more RMB than before hike interest rates, that is, the RMB depreciates against the US dollar.

The most direct impact is negative RMB exchange rate , and the RMB depreciates from the outside, thus achieving the purpose of the United States to reduce debt, transfer the crisis, and weaken the international status of the RMB.

2. Increase capital return.

Due to the US dollar's interest rate hike, a part of the US dollar will flow back to the United States. This will lead to the risk of high foreign debt costs and increased capital outflow pressure in my country. This is not good for those companies in my country that rely on foreign investment. This means that the company will be drawn from a big blood and the operating risks will be increased.

3, causing stock market turmoil.

Due to the blood-drawing effect of the funding caused by the US dollar interest rate hike, global funds will be tilted towards the United States, and A shares funds are no exception. The short-term period before and after the US dollar rate hike may cause stock market fluctuations and declines, and it will take a period of adjustment to digest this negative factor.

The above three points are based on the influence under normal conditions. But my country is now "mainly me" monetary policy , and will not follow the US dollar interest rate hike this time.

Based on this situation, first of all, the RMB will depreciate in the short term, but in the long run, the depreciation of the RMB will be conducive to exports. In addition, the sustained and stable growth of my country's economy, the purchasing power of the RMB will also increase in the future and will not affect the future appreciation of the RMB.

Secondly, because my country's economy is generally resilient and adheres to conventional monetary policies, it has a strong attraction to international capital, so there is a small possibility of large-scale capital outflows. Some experts also said that even if the Fed's interest rate hike is in place, European and American financial assets are still facing pressures such as high valuation and high inflation, and RMB assets are expected to become a safe haven for global funds.

Furthermore, since my country was curbing the inflow of external capital last year, the proportion of foreign capital holdings in my country's stock and bond markets is currently low. Therefore, even the impact of the return of the US dollar on my country's stock market is limited.

Although the US dollar rate hike is something we expected and has little impact on our country, the spillover effect of the US dollar rate hike on the global market cannot be ignored.

In this regard, my country's senior management stated that we must keep the economy running within a reasonable range and maintain the stable operation of our country's basic market. Therefore, it is our top priority to stimulate the economy, encourage consumption, and solve employment problems.

Secondly, in terms of monetary policy, since my country's economic growth target this year is 5.5%, and my country's current inflation rate is only 0.9%, our monetary policy will continue to choose a loose policy in the future to further stimulate the development of the market economy . As the saying goes, the United States is stepping on the brakes, but we are stepping on the accelerator.

So how should we ordinary people deal with it?

Although everything is expected and we don’t need to worry too much, we still have to prevent problems before they happen. With the uncertainty brought by the US dollar interest rate hike to the international market, we must cherish our work in 2022, not change jobs, invest cautiously, and save some money for emergencies.

Author: Li Yunfei, founder of a well-known Internet company and CEO of a large food chain company. He has been engaged in the Internet and physical chain industry for 16 years. He has been reported continuously by well-known media platforms such as Sohu.com, NetEase Finance, Tencent , Phoenix.com , Zhongxun.com , Baidu and other well-known media platforms. He is good at Internet marketing and chain enterprise management.