This week is a global super central bank week, and many central banks are likely to raise interest rates. The U.S. Federal Reserve is the first to raise interest rates by 0.5%, and the European and British central banks are also likely to raise interest rates. In addition, the central banks of Switzerland, Norway, Mexico and other countries may also raise interest rates. Interest rate hikes are basically doomed. The question is whether the rapid rate hike cycle of central banks has reached a watershed, and it is time to slow down rate hikes.
The US Federal Reserve announced on Wednesday that it would raise the benchmark interest rate by 0.5% from a range of 3.75% to 4% to a range of 4.25% to 4.5%. This is the first time the Federal Reserve has raised interest rates by only 0.5% since May this year. After the interest rate hike news was announced, the US stock index once plunged 700 points.
Federal Reserve Chairman Powell held a press conference after the interest rate meeting, saying that the latest economic data has improved the Fed’s confidence in the fall in inflation and is expected to accelerate progress. His statement stopped the decline in US stocks, and the decline narrowed sharply.
Just before the Fed meeting, the core inflation and CPI (consumer price index) announced by the United States in November and the month-on-month growth of 0.1% and the year-on-year growth of 6% last year were respectively lower than October’s 0.9% and 6.2%, the year-on-year growth returned to 6%, reassuring the market a little. The core inflation figure is a key indicator for determining the US interest rate policy. The decline in core inflation means that the Federal Reserve does not need to raise interest rates by 0.75%, and can gradually narrow the increase.
There are several points worth noting when the Fed raises interest rates:
First, the interest rate hike lasts longer and has a higher peak. The Fed announced the latest interest rate dot plot of members’ intentions, releasing a negative message: the period of future interest rate hikes will be extended. Powell said in a news release that it may be appropriate to continue raising interest rates, and there is still some way to go in the future. The pace of interest rate hikes is no longer an issue, the ultimate level of interest rates is more important.
The Federal Reserve’s interest rate forecast for the end of next year has risen from 4.6% three months ago to 5.1%, which means that interest rates will be raised by 0.75% in the future. If each increase is 0.25%, that is Three more rate hikes. The Federal Reserve expects to cut interest rates by 1% each year in 2024 and 2025, which means that interest rates will peak next year, but the peak may be delayed from the first half of the year to the second half of the year.
Second, there is consensus on slowing rate hikes. This is the first time since May that the interest rate hike has been reduced from 0.75% to 0.5%. The members of the Federal Reserve Open Market Committee voted unanimously in favor of raising interest rates by half a percentage point, which shows that there is no dispute within the Federal Reserve Board about raising interest rates by only half a percentage point. It is a good signal that no member thinks that the interest rate will be raised by 0.75%, which shows that the Fed agrees that the substantial interest rate hike has achieved the desired effect and that the rate hike can be slowed down.
Third, the US economy is at risk of recession. The Federal Reserve expects the U.S. GDP to grow by 0.5% this year, and the GDP growth rates in 2003 and 2024 will be 0.5% and 1.6% respectively, and the forecasts in September were 100%. 1.2% and 1.7%, reflecting that the Fed is bearish on next year’s economic growth. Powell said that the U.S. economy has slowed down sharply compared to last year, and the economy will grow moderately this quarter. No one knows whether the U.S. economy will fall into recession. The path to a “soft landing” is narrow but still possible.
The Federal Reserve expects the economy to grow by only 0.5% next year, almost between plus and minus. However, the Federal Reserve is still raising interest rates in the first half of the year. It is expected that the US economy will not improve in the first half of the year. The economy is expected to recover until the interest rate hike stops.
In short, interest rates in the United States will continue to rise, which is not good for the property market in Hong Kong. If the US economy grows by only 0.5% next year, as predicted by the Federal Reserve Board, the demand for exports to the US market from Hong Kong and the Mainland will be relatively large. weak. Fortunately, the mainland has rapidly relaxed its anti-epidemic policies. It is estimated that the Chinese economy will have a chance to return to normal in the first quarter of next year. Global growth in the coming year will depend on China.
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Lu Yongxiong