Big night!The Us Federal Reserve raised interest rates for the first time in three years. What is the impact on China?

2022-09-19 0 By

New Finance and Economics on March 17 (Gong Hongyu) hanging in the global capital market head of the sword finally fell!Early morning Beijing time, the Federal Reserve officially announced a 25 basis point increase in the benchmark interest rate!It was the first rate hike since December 2018, and the DOLLAR and U.S. stock indexes also rose.Experts point out that the interest rate change is mainly based on the US inflationary pressure.At the same time, the Federal Reserve interest rate will test the initiative of China’s monetary policy.File photo: Federal Reserve Chairman Colin Powell.On Wednesday, the FEDERAL Open Market Committee raised its benchmark interest rate by 25 basis points to a range of 0.25% to 0.50% and is expected to begin reducing its holdings of Treasury and agency mortgage-backed securities at its upcoming meeting.Inflation remains high, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures, the Fed said in its statement.The conflict in Ukraine could create inflationary pressures and slow economic growth.Us consumer price index (CPI) rose 0.8% month-on-month and 7.9% year on year in February, the largest year-on-year increase since January 1982, according to data released by the US Department of Labor on March 10.Li Xunlei, chief economist at Zhongtai Securities, told China New Finance that the Fed’s tightening and rising interest rates are mainly based on inflationary pressures rather than economic recovery.Before the current rate hike, the US was facing much more inflationary pressure than the previous round, and the domestic economy and employment patterns were more complicated.In addition, the Fed’s latest dot plot shows that most policymakers expect the federal funds rate to rise to at least 1.875% by the end of this year, 2.75% by the end of 2023, and remain unchanged through 2024.That means the Fed will raise rates six more times in 2022.Fed Chairman Jerome Powell also said in a press conference after the rate decision that the Federal Reserve could announce the start of the reduction of its balance sheet as soon as May, and the framework of the balance sheet will be similar to the last time, but the pace will be faster.After the Fed’s rate hike, Wind data showed the dollar index DXY was higher, up nearly 35 points in the short term, while the euro EUR/USD fell nearly 50 points in the short term.However, the dollar rose short – term followed by weakness.The DOLLAR index was up 0.15% at 98.52 as of press time.On the day, US stocks shrugged off pressure from the Federal Reserve to accelerate monetary tightening.At Wednesday’s close, the Dow Was up 1.55% at 34,063.1;The S&P 500 gained 2.24% to 4,357.86;The Nasdaq closed up 3.77% at 13,436.55.Li Xunlei, chief economist of Zhongtai Securities, previously analyzed that the real interest rate of the US dollar may not go higher if the Fed raises interest rates under high inflation.In the medium and long term, once the floodgates of us debt monetization are opened, it will be difficult to stop, which will shake the status of the US dollar in the world.Li Xunlei pointed out that the U.S. stock market on low interest rates, high short-term adjustment pressure.Tech giants have accounted for most of the index’s gains over the past decade, contributing significantly to their leveraged share buybacks in an environment of high profit margins and low interest rates.Under the long-term low interest rate environment, the valuation of THE US stock market is at a high level, and the rise of interest rate will bring greater adjustment pressure to the US stock market.”But in the future, when inflationary pressures ease, the U.S. returns to a low interest rate environment due to economic and employment pressures, or U.S. stock valuations adjust to reasonable levels, tech giants with global technology monopolies in the U.S. stock market will be in demand again.”Li Xunlei said.What impact will it have on China?Zhao Xijun, co-dean of the China Capital Market Research Institute at Renmin University of China, said the Fed’s interest rate hike will make us dollar assets appreciate and easily lead to capital outflow.The easing of China’s monetary policy means that the interest rate gap between the yuan and the dollar will further narrow, posing some challenges to maintaining balance of payments fund flows and the stability of the RMB exchange rate.In this complex environment, the initiative of China’s monetary policy is tested.File photo: RMB.On March 16, the Financial Stability and Development Committee of The State Council held a special meeting to study the current economic situation and capital market issues.Monetary policy should be proactive and new loans should maintain moderate growth, the meeting said.Dong Ximiao, chief researcher of Zhaolian Finance, believes that the next step should be timely use of a variety of monetary policy tools such as interest rate cuts and reserve requirements, and precision force in the front.At present, the weighted average reserve requirement ratio for Chinese financial institutions is 8.4%. There is still room for RRR cuts.The medium-term lending Facility (MLF) operating rate has remained unchanged for two months, and it is necessary and possible that the policy interest rate and market interest rate will continue to decline.Stock market, March 16, A shares, Hong Kong stocks have surged.For the Federal Reserve rate hike, some analysis believes that although the rate hike is A negative factor, but with the boots on the ground, the market uncertainty will end, and the market sentiment has been preheated for A long time to be digested in advance, A shares will not be A big impact.Relevant departments should also introduce targeted policies and measures to provide more “real money and silver” to maintain the stability of the capital market and support its healthy development, Dong said.Zeng Gang, deputy director of the National Financial and Development Laboratory, pointed out that some policies are expected to continue to be rolled out in accordance with the arrangements of the meeting, and gradually remove some major risks and uncertainties in key areas of market concern, creating a more favorable investment environment for market operation.(End) (