Niu Wenxin: The Federal Reserve Stress Mountain -Powell's interest rate hike will be "leisurely"

"China Economic Weekly" chief commentator Niu Wenxin

In the early morning of July 28, Beijing time, the Federal Reserve did not surprise 75 basis points for the second time. The stock market generally rose, the S & P closed up 2.6%, the Dow rose 1.37%, and the Nasda Index closed up by 4.06%; in contrast, the US dollar index closed at 106.48, closed down 0.69%, and the 10 -year US debt rose, and the yield fell to 2.730 to 2.730 %.

Is this weird trend? In fact, this is another evidence that the United States "expected to be more clever". On the eve of the interest rate hike, Wall Street reported that the interest rate hike will reach 3.8%of the peak in June next year, and then will inspire economic growth with interest rate cuts, and the federal benchmark interest rate will also fall to nearly 2.5%. It is this news that allows the new round of adjustments that the US stock market should have begun. After the interest rate meeting, when the Federal Reserve Chairman Powell is cautious about continuing to raise interest rates, the US stocks, US debt and US dollar have all appeared above the above. Different trend.

Powell stated after announcing 75 basis points that whether to implement the ultra -conventional interest rate hike depends on economic data, and if necessary, they will not hesitate to take greater action. As the interest rate becomes more restricted, slowing down the pace of interest rate hikes may be appropriate at a certain time.

Judging from the views expressed by the Republican members of the Congress in recent times, Powell is under pressure because these Republican members believe that if the US economy has recession due to excessive interest rate hikes, the responsibility will make Powell unable to eat. Perhaps because of this, Powell has to face thin ice and face possible decline in the future with a more prudent attitude. But Powell's slight comfort is that US Treasury Secretary Yellen refused to acknowledge the decline, and even thought that even if GDP grew negatively for two consecutive quarters, it was not an economic recession.

It is worth noting that Powell gave the "definition of responsibility" this time. He said: Although the Fed is firmly committed to letting inflation fall to 2 % of the target, the high inflation in the United States reflects the imbalance of supply and demand caused by rising epidemic, food and energy prices, and wider price pressure. He said that the Russian conflict and its related incidents caused additional upward pressure on American inflation. But he currently said that the Fed is almost unable to reduce food and energy prices.

There is no doubt that interest rate hikes will suppress economic growth and even lead to economic recession. However, the rise in prices will actually bring severe suppression of a country's economy, especially in the United States such as "80%of the total GDP". At present, the rise in prices has increased pressure on the US economy. According to Powell's words: Although employment has grown strongly, the recent expenditure and production indicators have been weakened.

This seems to be a very contradictory issue: on the one hand, the supply factors (non -monetary factor) are still stimulating prices soaring, thereby suppressing the US economic motivation; on the other hand, the Federal Reserve raises a sharp interest rate and suppress the price of prices with monetary means. Will the two additional results make the US economy really fall into the recession trap? In fact, this is the trouble of cracking "stagnation".

Judging from the trend of development, the Fed will pay great attention to its domestic economic and healthy status, so it is inevitable to adopt the "leisurely" behavioral code on the issue of interest rate hikes. In addition, the United States' measures to suppress prices with "non -monetary means" are also underway. For example, the US Department of Energy announced on July 26 that 20 million barrels of strategic oil reserves will be sold on July 26. In March 2022, the Bayeng government promised to release 180 million barrels of oil storage plans, and now it has sold approximately 125 million barrels to the market. The rest will be sold in the future, and the 20 million barrels sold now belong to this remaining part.

Furthermore, on July 22, Russia and Ukraine signed an agreement with Turkey and the United Nations to solve the issue of grain and fertilizer supply with Turkey and the United Nations, respectively. The two countries have agreed to re -open Ukrainian Heihai Port for grain exports. This incident will at least have a positive impact on international food prices.

Of course, "non -monetary means" inhibit prices, which may include whether the United States can cancel the issue of malignant tariffs imposed on China as soon as possible.

Responsible | Yao Kun

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