"Xue Si Pingzhi" Li Yang: How does the Federal Reserve ’s interest rate hikes affect the global economy?

Li Yang: How does the Fed ’s interest rate hikes affect the global economy?

Xue Si Pingzhi

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Everyone has discussed the Federal Reserve ’s interest rate hike watch, let’ s look at some facts first.

In the early morning of June 16, the Fed announced that it had raised interest rates of 75 basis points, and the interest rate hike was relatively large, but it did not exceed people's expectations, so its uncertain impact will be smaller.

At the same time as interest rate hikes, there is a shrinkage. This is very clear about this. The monetary policy is nothing more than two lines: one line is price and one line is quantity. The quantity and price change at the same time changes at the same time, and it can be seen that the intensity is still relatively strong.

When you talk about such operations, there are more to suppress inflation and analyze these policies of the Fed in using some disdainful languages.

I think I still need to use scientific analysis methods calmly. This judgment is a very big thing. If the judgment is wrong, it may cause obstacles to our future development.

A series of measures for the Fed's tightening is definitely inhibiting inflation, but we must notice that inhibitory inflation is not ignored. Because the main goal of monetary policy is economic growth, if employment and growth will be very damaged, then interest rate hikes and shrinkage may not continue, at least not so aggressive. In fact, any macroeconomic policy is a choice for both macroeconomic policies.

We found that the scale changes in the scale of the United States CPI and the Federal Reserve's balance sheets are closely related, showing that the operation of the Fed's amount of amount on volume may have a greater impact on the US economy and at least on the US price trend.

Everyone knows that since the end of the last century, the Monetary policy operation of the Federal Reserve is mainly based on interest rates -interest rate hikes and interest rate cuts. Everyone is accustomed to referring to the meeting of the Fed's Operation Commission for Public Reserve. In fact, it also implies a meaning, that is, changes in interest rates have a great impact on the US economy.

We have now formed a fixed formula that regulate interest rates is market -oriented, and the number of regulation is non -market -oriented. My opinion is that quantitative regulation and price regulation are inherent in the mechanism, so it is difficult to say which one is more effective.

Let's look at the comparison of the Fed interest rate and the US M2. Thirty years after 1990, the relationship between currency supply and interest rates has declined, and the current interest rate level has not reached historical highs, and it is still far away.

Don't be a fuss about the Federal Reserve's one -time raising 75 basis points at one time. This kind of thing has happened in the past, and we have all experienced and dealt with.

The changes in US monetary policy will naturally cause changes in Europe (the European Central Bank). The Bank of Japan recently stated that they are still unchanged because they feel that economic recession is the first problem to deal with.

In an environment of completely free flow, according to changes in a country, the same changes in other countries should also be changed.

However, this is not the case in the past 20 years. In the past 20 years, Europe and the United States and Japan have basically gone two ways and two directions, indicating that this is possible to coexist and it is worthy of our serious research. We are now studying international financial changes. First of all, we must talk about the United States. In fact, the changes in Japan and Europe have a great impact on us, especially Japan. Now that the European Central Bank is also preparing to step on the U.S. Houchen, it may be raised at the end of the year. At present, the global price is high, but the prices of some commodities have been topped, and the main reasons for the implementation of a tightening monetary policy have been weakened. So why should we raise interest rates?

I have also discussed the price problem in public. I believe that inflation is not a currency phenomenon. Many people say that Professor does not even understand common sense. Inflation is the currency phenomenon anyway and wherever it is. It is not caused by the amount of currency, and the impact of the supply side is the main cause. For example, the rising price of crude oil, natural gas, commodities, and grain prices has nothing to do with monetary policy. As the Russian conflict may enter a relatively stable period, the price may also fall.

Another thing worthy of our attention is to return to normal. The so -called regression is relatively abnormal. Everyone thinks about it. From the end of the last century, the monetary policy was abnormal. The United States, Japan, and Europe were abnormal. Especially the monetary policy of the United States. Essence Since it is super routine, when the conditions are permitted, the return is normal.

For example, interest rates, the world has been low interest rates since the end of the last century, which is abnormal. You must know that the previous interest rates were 10%and 20%, there were more than 20%of China, plus value preservation subsidies.

From the end of the last century, low interest rates were implemented to ultra -low interest rates from 2007 and 2008, and US interest rates fell to 0, and then there were negative interest rates in Denmark in 2012. The interest rates around the world have been abnormal over the past 20 years.

Everyone who is doing finance knows that at this interest rate level, some of the analysis methods of observation of finance, the method of judging price trends, and many investment options we usually know need to be discussed. And when the most critical situation has passed, do we need to return to normal? Of course need.

When discussing this issue in recent years, I said that there may be two paths after deviating from the track: one is to return to the original, and the other is another way. Now I think the possibility of possibility of another way exists. If the ultra -low interest rate is maintained for a long time, the role of the quantitative relationship in the financial system may be more and more. This is a new issue.

However, the return is normal is the pursuit of the monetary authorities. Therefore, many Federal Reserve officials talk about returning to normal. Talking about the changes in neutral interest rates and the real economy, there is also the relationship between wages, employment rates and them.

I want to say that because finance is to serve the real economy. If the real economy changes, monetary finance must adapt to this change, and to maintain the healthy and normal development of the real economy. This is the monetary policy.

In addition, I have been in the Federal Reserve to learn about their decision -making process. For example, Grimpan will see several main indicators at the time: wage rate, labor productivity. If labor productivity increases more than wage rates, everything else can be ignored. In other words, changes in the real economy have always been the main anchor of currency authorities. I hope that everyone can see that there are still many deep things in addition to anti -inflation that may affect the future.

Now everyone is talking about how much the US monetary policy has affected the economy. It can be said that there is indeed influence. In a speech, Fredman said: "Inflation is compared to alcoholism: when I first drink, the short -term impact is exciting and energetic. It is only displayed in the morning. The inflation is also the same. The initial impact is positive, but the sequelae is not expressed the next day, but it takes several years to overcome it. " It is very difficult, it feels strong, it needs strong perseverance, and it must be persistent. "The reason is very thorough.

Applying these remarks to inference, if the Federal Reserve desperates inflation, it must be a problem at the beginning, but after the problem is resolved, it may enter a normal development stage, rather than everyone mistakenly think that it will do it every day. Broken.

Regarding the transformation of the Fed's monetary policy, the second issue we want to pay attention to is its spillwalk impact.

Both the expansion and shrinkage effects: expansion will lead to an increase in capital inflows, our interest rates may decline, because the currency increases, the RMB will increase, asset prices will rise, housing prices and stock prices will rise, and then they will rise. There are input -inflation; shrinkage will lead to capital outflow, our interest rates will have upward pressure, currency will depreciate, asset prices will decline, housing prices and stock prices will decline, currency tightening will occur, and development costs will rise.

As the world's most influential central bank, the Federal Reserve has a great impact on the world. In summary, it has more favorable impact on us when expanding, less disadvantages, and more disadvantages to us.

It is currently in a tightening period, and its adverse effect on us has appeared, and it will be further appeared, so China's monetary policy space will be compressed.

Looking at some related numbers of capital flows: At the end of April, the balance of foreign currency deposits was 997.5 billion US dollars, a year -on -year decrease of 0.7%. Among them, foreign currency deposits fell 48.8 billion US dollars in April, a year -on -year decrease of $ 96.6 billion. The export surplus in April was US $ 511.2 billion, and official statistics attracted US $ 15.38 billion. However, the foreign exchange reserves in April have reduced US $ 68 billion, of which there are RMB depreciation factors and capital outflow factors. Some people roughly estimate that in 2022, my country's capital flows out more than $ 100 billion.

These numbers look shocking, capital flows a lot, and the RMB exchange rate has fallen to about 6.7. If we have elasticity and toughness, the US Fed's policy adjustment has affected our elasticity and toughness, and China will find a balanced point in these shocks.

Li Yang: Lecturer of Chang'an Street Reading Club, Member of the School of Social Sciences of the Chinese Academy of Social Sciences

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