Federal Reserve "radical" rate hike

Faced with inflation, economic growth, and currency tightening

"Can't triangle"

Compared to promoting economic growth, it is currently curbing inflation

Has become the primary goal of the Federal Reserve

Located in the Federal Reserve building in Washington, USA. Picture/Xinhua

Faced with high -expected high inflation, the Fed announced on June 16 that the Federal Reserve announced 75 basis points, which was the largest single -rate interest rate hike in the United States since 1994.

Following the 25 basis points and 50 basis points in March and May of this year, the Federal Reserve announced in the June interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest interest rates rate of 75 basis points to 1.50 % to 1.75 % of the target range. Half an hour after the statement was released, the Federal Reserve President Powell delivered a speech to appease the market emotions, admitting that the risk of inflation in the past month is still up, further exceeding expectations. Essence Regarding how the Fed will determine the rate of interest rate hikes in the future, he said that this mainly depends on "data", and said that 50 basis points and 75 basis points raised interest rate hikes in July are all suitable, and the interest rate hikes of 75 basis points are very state.

After Powell's speech, the market response was positive. U.S. stocks and US bonds have ushered in a strong rebound. As of the day, the S & P 500 Index closed up 1.46 %, the Dow rose 1 %, the Nasda Index closed 2.5 %, the 10 -year Treasury yield rate The deepening of nearly 19 basis points within the day closed at 3.29 %, and the US dollar index also dropped significantly below 105 points. However, in the next two days, the market's confidence in the Federal Reserve ’s final economic soft landing weakened again, and the concerns about the decline in economic recession rose up. U.S. stocks went down, and hedge funds once again set off a wave of short -selling. In addition, the Federal Reserve ’s interest rate hike also caused some developed countries or economy central banks such as the Central Bank of China, Bank of England, and the National Bank of Switzerland.

The market is not expected to raise interest rates for the Fed's "radical". Data released by the US Department of Labor on June 10 showed that the US Consumer Price Index (CPI) increased by 8.6 % year -on -year, which was higher than the market expectations of 8.3 %. Since December 1981, it has reached a new high; and the year -on -year increase in this indicator has been more than 8 % for three consecutive months. After excluding large fluctuations and energy prices, the US core CPI increased by 6 % year -on -year, higher than the market expectations of 5.9 %. The unexpected rebound of inflation data in May disrupted the expectations that the market may have seen the U.S. inflation.

Faced with the inflation expectations with the risk of "anchoring" and the inflation of the Biden government, which was questioned by the public, before the Fed held this interest rate meeting, some market institutions predicted that the interest rate hike may be 75 A basis. Compared with its usual interest rate hike (25 basis points), this rate hike is unusual, but in fact, as early as the Fed started to raise interest rates this year, the market expressed concerns about rising prices. There are also some institutions. It is pointed out that inflation is stubborn and long -term, but the Federal Reserve still insisted that inflation was temporary until November last year, and eventually it only announced in March that it only announced a small interest rate hike 25 basis points.

Obviously, in the face of the "impossible triangle" of inflation, economic growth, and currency tightening, compared with economic growth, curbing inflation has become the primary goal of the Federal Reserve. After the June Interest Meeting, the Federal Reserve said in the statement that the (Federal Open Market) Committee firmly committed to restoring the inflation to 2 % of the target ", and in the economic forecast it released Speed ​​1.1 percentage points to 1.7 %, and the economic growth forecasts were lowered in 2023 and 2024 to 1.7 % and 1.9 %, respectively.

For a period of time, the market is concerned that the Fed may not solve the current supply constraint and control inflation, and has to "sacrifice" economic growth to curb inflation, and repeat Paul Walker in the early 1980s. Great recession. However, in his speech, Powell emphasized the subjective willingness to actively guide the decline of non -Federal Reserve, and its economic prediction does not think that the United States will fall into decline in the next two years, reflecting that the Federal Reserve believes that the US economy "soft landing" is not impossible.

Since 1965, only twice in the 11 rounds of interest rate hikes experienced by the Federal Reserve has reduced inflation levels twice, and has not triggered economic recession. Many analysts believe that it is difficult to achieve economic "soft landing" in this round of interest rate hikes. Essence

Jong Zhengsheng, chief economist of Ping An Securities, analyzed: "At present, the situation in the United States and global inflation is still severe. The Fed and the market seem to be making 'worst plans'. It may allow the restrictions of the US economy 'hard landing'. "

In his opinion, the market may not give up prematurely for "soft landing". "The Federal Reserve's decision -making needs to maintain a forward -looking and flexible, or to slow down the tightening rhythm in time when judging the inflation pressure controlled, try to avoid the" brake 'too fierce. There are still certain uncertainty if you raise interest rates to more than 3.5 % during the year. "

Send 2022.6.27 Total Issue 1049 "China News Weekly" magazine

Magazine title: The Federal Reserve "radical" interest rate hikes

Author: Wang Xiaoxia

Edit: Wang Xiaoxia

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