The strong dollar is putting pressure on the economies of developing countries (Getty)
Last Wednesday evening, following the decision to increase the interest rate by half a percent, signals were issued about Federal Reserve BoardThe Central Bank of America confirms that the bank is proceeding with the plan to raise the interest rate on the dollar, and that there is no ceiling for this hike as long as there is an increase in the rate of inflation accompanied by growing concern that the US economy will enter the tunnel of inflationary stagnation, and perhaps recession, as happened in 1939.
This is because the Federal Bank is well aware that combating runaway inflation must be a top priority for the economic and monetary decision-maker, and that confronting high prices is much more important than the goal of increasing the growth rate and improving economic indicators.
The Fed confirms that it will not soon end its campaign to raise interest rates aimed at controlling hyperinflation
Among these signs, Federal Reserve Chairman Jerome Powell confirmed that the bank will not soon end its campaign to raise interest rates aimed at controlling inflation, and that “we still have a way to go in this path, and the pace of raising interest at the next February meeting will depend.” on economic data.
And in decisive language and out of the way on any expectations that the Fed will go to stop or freeze the plan to raise interest rates, Powell said: “We will not consider cutting interest rates until we are confident that inflation is slowing towards the target of 2% in a sustainable way. Restoring price stability is likely to require maintaining restricted position for politics for some time.”
Among the signs as well, the US Central Bank expected the interest rate to reach 5.1% next year, up from the previous estimate issued last September of 4.6%, which means that it will continue to increase the rate in the upcoming meetings.
Even the central bank’s open market committee has confirmed that it would be appropriate to continue interest rate increases, in order to reach a stance restrictive enough to bring inflation back to the 2% target over time.
So, the Fed will continue to raise the interest rate until mid-2023, and perhaps until the next September meeting, and perhaps beyond that, and prevailing inflation rates will determine the rate of increase and the timing of its fixation or reduction at a later time.
With Ukraine’s war, inflation, and supply chain crises continuing to slow, central banks are not expected to stop the wave of rate hikes
It seems that with the continuing crises of the Ukraine war, the inflationary wave, the supply chains, and the economic slowdown, it is not expected that the major global central banks, including the Federal Reserve, will stop the wave of interest rate hikes.
The latest forecasts in this regard indicate continued inflationary pressures on major economies, issued by one of the largest investment banks around the world, Goldman Sachs, who predicted, at the end of last week, that commodity prices would rise by more than 40% in 2023.
In addition, the energy crises and economic war with Russia and the scarcity of raw materials from oil to natural gas and minerals will put severe pressure on the economy of the old continent in 2023, which will push the European Central Bank to accelerate the wave of raising interest on the euro, noting that the bank raised the interest rate by 0.50% on the day Last Thursday, to increase the price from 1.5% to 2%, the highest level since the global financial crisis in 2008.
Repeat with Central Bank of England Who raised the interest rate on Thursday for the ninth time in a row, to reach its highest level since 2008, in light of its efforts to confront high inflation that exceeded 10.7% last November, the highest level in 41 years. do more.
Raising interest rates on major currencies, including the dollar, the euro, the pound sterling and the Swiss franc, will cause Additional troubles for economies and currencies Emerging markets, which rely on global markets to manage dollar liquidity, bridge financing gaps, cover budget deficits, and pay wages and salaries.
This is because the hike means additional burdens on external borrowing operations in developing countries, and even a scarcity of foreign liquidity in the markets of those countries, with the escape of hot money and investments from it heading towards Western markets to benefit from high returns, guarantees and political stability.