Announced a rate hike again! What is the impact of the Fed’s repeated interest rate hikes？ Expert interpretation

　　In the early morning of July 27th, Beijing time, the Federal Reserve announced its interest rate resolution in July, announcing a 25 basis point rate hike. This is the 11th rate hike of the current round of interest rate hike by the Federal Reserve since March 2022. After this interest rate hike, the target range of US federal funds interest rate has risen to 5.25%~5.50%. The Federal Reserve announced a 25 basis point rate hike in July.

　　Restart the 11th interest rate hike after the suspension.

　　The Federal Reserve said that the current inflation rate in the United States remains high. While raising interest rates, the Fed will continue to assess more information and its impact on monetary policy. According to statistics, the current federal funds interest rate in the United States is the highest level since September 2007.

　　Lu Zhe, chief economist of Debon Securities: At this stage, inflation, especially the cooling of PCE (Personal Consumer Expenditure Price Index) and its future trend are still the primary factors that the Fed pays attention to, followed by the lag of monetary tightening effect and the current degree of credit tightening. Overall, the current PCE (Personal Consumption Expenditure Price Index) in the United States is still far from 2%.

　　Earlier, in June, the Federal Reserve suspended raising interest rates once, but at that time, Federal Reserve Chairman Powell still released a signal that he would continue to raise interest rates according to the actual situation.

　　Wen Bin, chief economist of China Minsheng Bank: As the interest rate hike approaches the end, the Fed will appropriately slow down the pace of interest rate hike to avoid policy overshoot. Discontinuous interest rate hikes allow the Fed to refer to more data. However, the current interest rate has risen to a higher level due to the aggressive interest rate hike by the Federal Reserve, which will also make it more difficult for its follow-up policy regulation. If it is improperly operated in the process of interest rate hike in the future, it will probably aggravate economic fluctuations.

　　Raising interest rates has caused multiple complex effects in the United States.

　　The Fed’s interest rate hike is aimed at solving the problem of high inflation in the United States, but in fact, since March last year, the Fed’s repeated interest rate hikes have caused multiple complex effects in the United States.

　　Justin Hu, a professor at Shanghai Institute of Advanced Finance, Shanghai Jiaotong University: The Fed mainly formulates monetary policy rules based on data. At present, although the inflation data in the United States is in a downward trend, it is still at a high level. In addition, what we see is that the continuous tightening of monetary policy has also affected the unemployment rate and economic growth in the United States to a certain extent, which is also a concern of the public.

　　Experts said that due to the continuous aggressive interest rate hike, the current real interest rate in the United States has reached a relatively high level in the past 20 years based on the yield of one-year US Treasury bonds. This relatively high real interest rate has brought obvious influence to the operation of the real economy. Data show that from December last year to May this year, the US money supply (M2) declined for six consecutive months. In the first quarter, the annualized growth rate of GDP in the United States dropped to 2%; Domestic private investment in the United States decreased by 8.05% year-on-year. From March to May, American industrial and commercial loans declined for three consecutive months. The effect of raising interest rates is gradually being transmitted to different areas of the American economy.

　　Zhao Yue, chief economist of Hong Kong Zhifu Securities: The latest private investment in the United States has begun to show some obvious decline. At the same time, the industrial and commercial credit of commercial banks has also shown a significant decline. The repayment pressure of household mortgage loans is gradually increasing with the increase of interest rates, so there may be a downward pressure on the real estate market and household consumption in the United States in the future. In fact, the US economy is gradually turning to a new trend of gradual decline in economic growth.

　　Excessive austerity may lead to a continued slowdown in US economic growth.

　　According to the latest report released by Standard & Poor’s Global, the overall expansion rate of business activities in the United States has slowed down to the slowest level in the past five months. The mood of enterprises about the prospect of the coming year has deteriorated sharply to the lowest level since this year. These also have an impact on the US capital market and the trend of the US dollar. Experts said that if the Fed tightens excessively, it is not ruled out that the US economic growth will probably slow down further.

　　At present, there is a certain degree of differentiation in the monetary policy of global central banks.

　　Recently, as the pace of interest rate increase by the Federal Reserve slows down, the pressure of other central banks around the world has also weakened, and the monetary policies of various countries have diverged to some extent.

　　According to statistics, the central banks of South Korea, India and other countries have stopped raising interest rates in March and April this year. The European Central Bank and the Bank of England are among the few central banks that still maintain a more aggressive pace of raising interest rates. The Bank of Japan recently announced that it will continue to adhere to the loose monetary policy for a short period of time. From the recent observation, the monetary policies of central banks around the world are gradually weakened by the influence of the Federal Reserve.

　　Lu Zhe, chief economist of Debon Securities: As the Fed’s interest rate hike entered the end of this round, the interest rate hike decisions of other central banks around the world paid more attention to the dynamic changes of domestic inflation and were relatively weakened by the Fed. Thanks to the improvement of inflation levels in various countries, the pace of interest rate hikes has gradually slowed down, which is beneficial to the recovery of the global economy in the long run.

　　Gold continues to be welcomed by global central banks.

　　At the same time, the pace of gold purchase by global central banks continues. According to a survey conducted by the World Gold Council in May, 24% of the world’s central banks intend to increase their reserves in the next 12 months. Compared with the US dollar, the central bank’s view on the future role of gold has become more optimistic, with 62% of the respondents saying that gold will account for a larger share of the total reserves, compared with 46% last year.

　　Justin Hu, a professor at Shanghai Institute of Advanced Finance, Shanghai Jiaotong University: This year, the momentum of central banks buying gold has not weakened overall. The direct driving reason is related to the still high inflation in some countries. At present, the world economic situation, interest rate level and asset prices are still turbulent, and views on some asset markets are also divided, which makes the management of reserve assets of the central bank more challenging. It is a reasonable choice for the central bank to appropriately increase the proportion of gold in the current economic stage.

　　China’s monetary policy "focusing on me" matches the economic situation.

　　Compared with the policies of the Federal Reserve, the People’s Bank of China has always maintained its policy strength, and the prudent monetary policy is flexible, moderate, accurate and effective, and China’s economic development continues to pick up.

　　The Fed’s current interest rate hike since last year is the fastest and steepest in previous interest rate hike cycles. Many emerging market economies have also begun to tighten monetary conditions in response to high inflation and capital outflows. In contrast, China adheres to a prudent monetary policy, keeps the monetary policy in a normal range, and the interest rate level is generally stable, showing the characteristics of "taking me as the mainstay" and the autonomy and effectiveness of monetary policy have obviously increased.

　　Wen Bin, chief economist of China Minsheng Bank, said: China’s monetary policy is "I-oriented", and a prudent monetary policy is implemented accurately and forcefully, and counter-cyclical adjustment is intensified. Generally speaking, China’s monetary policy is relatively matched with the economic development situation, and China’s interest rate level is moderate and relatively stable, leaving room for both tightening and relaxing.

　　RMB assets are attractive in global investment.

　　The State Administration of Foreign Exchange also said at a recent press conference that China’s economy continued to pick up, the cross-border capital flow was relatively stable in the first half of the year, the supply and demand in the foreign exchange market were basically balanced, and the good fundamentals made RMB assets attractive in terms of diversified investment value and diversified allocation of investors.

　　Greg Chrt, Global Multi-asset Investment Director of Allianz Investment: For a long time, China has been an important part of our global investment strategy, not only in the field of multi-assets, but also in a wider range of investment strategies and methods.

　　(CCTV reporter Liu Ying Dong Bin Sha Qian Shao Chen)