Xinhua News Agency, Beijing, January 7 Roundup: Expectations of Interest Rate Hikes by the Federal Reserve Strengthen The global financial market is overshadowed
Xinhua News Agency reporter Deng Qian
In the minutes of the December 2021 monetary policy meeting released by the US Federal Reserve Board on the 5th, it released a signal that the federal funds rate may be raised in advance and the balance sheet reduction process will be started. Expectations of the Fed's interest rate hikes have intensified, putting pressure on global financial markets.
Although the Fed has not yet specified when to act, the market has reacted clearly to this "hawkish" statement, and the world's major stock markets have fallen in response.
On November 30, 2021, traders worked on the New York Stock Exchange in the United States. (Xinhua News Agency, photo by Guo Ke)
The three major stock indexes in the New York stock market fell for two consecutive days, and the Dow Jones Industrial Average, the S&P 500 Stock Index and the Nasdaq Composite Index closed down 1.07%, 1.94% and 3.34% respectively from the previous session, and triggered a rotational decline in stock markets in Europe, Asia-Pacific and other regions. On the 6th, the three major stock indexes in the New York stock market continued their decline, closing down 0.47%, 0.10% and 0.13% respectively.
Europe's three major stock indexes fell across the board on the 6th. The Financial Times average price index of the Financial Times in London closed down 0.89% from the previous session; the CAC40 index of paris stock market in France fell 1.72%; and the DAX index of Frankfurt stock market in Germany fell 1.35%.
In terms of Asia-Pacific stock markets, the Tokyo stock market fell significantly on the 6th, with the average price index of 225 stocks in the Nikkei closing down 2.88%, and the Tokyo Stock Exchange stock price index fell by 2.07%. Australia's major stock index fell 2.7% on the 6th, the largest one-day decline since September 2020.
This is the Federal Reserve Board building photographed in Washington, D.C., on December 15, 2021. (Xinhua News Agency, photo by Shen Ting)
Jay Hatfield, chief executive of U.S. Infrastructure Capital Management, said the Fed's "balance sheet reduction" was a significant risk in 2022. Once the Fed starts shrinking its balance sheet, the impact will be damaging.
Analysts generally agree that the Fed's shift in monetary policy could lead to a sharp change in the global financing environment, with some emerging markets at risk of a reversal of capital flows.
The Central Bank of Argentina announced on the 6th that it will raise the benchmark interest rate from 38% to 40%. This is the first interest rate hike by Argentina's central bank in a year. The Argentine central bank said in a statement that the Argentine government wants to keep the currency and foreign exchange markets stable through the interest rate policy.
It is foreseeable that the Fed's acceleration of the "loose throttle" rhythm will further promote the strengthening of the dollar and the rise in global financing costs.
According to a questionnaire survey survey released by Reuters on the 7th, more than 80% of the surveyed analysts believe that the volatility of the foreign exchange market will increase in the next three months. Overall, the Fed's monetary policy tightening will provide enough upward momentum for the US dollar, and in 2022, it will show a "strong dollar" situation, and emerging market assets will face challenges.