The alarm is sounding!
In the two years of 2022 and 2023, the United States has been addicted to interest rate hikes, and has raised interest rates 11 times, pushing interest rates to the highest level in 23 years.
In this way, the high inflation in the United States has been reduced from the peak of 9.1% to about 3%, and the US stock market has also been carnivaling.
Because, when interest rates are raised, it will increase the incentive for funds to flow back to the United States, pushing up the dollar exchange rate, and the interest rate on bank lending will also rise, which will curb the loan demand of enterprises and individuals, reduce investment and consumption, and thus reduce economic growth and inflation.
However, the US interest rate hike will hurt some countries because some commodities are denominated in dollars on the international market, such as gold, oil, and the debt of some countries.
Taking debt as an example, let's say that the original $1 = 100 rupees, as the US dollar appreciates, 1 US dollar = 120 rupees, which means that the debt that used to be 100 million rupees needs to be repaid is now 12 billion rupees. The consequence of this is that debtor countries could fall into a deep recession, emergency hyperinflation, or even a sovereign debt crisis.
At the same time, the US dollar rate hike will push up the price of oil, and the cost will increase for some buying countries!
The impact goes far beyond that, as some countries experience inflation and recession.
And now, there is news that the United States may cut interest rates by 44 basis points in June.
When the federal funds rate falls, so does the interest rate on bank lending, which stimulates the demand for loans from businesses and individuals, increasing investment and consumption, thereby increasing economic growth and inflation. Interest rate cuts are good news for people who need a loan to buy a house, car, or other big purchases, as their monthly payments are reduced and the burden is lighter.
The U.S. interest rate cut aims to stimulate economic growth, reduce loan pressure, increase the enthusiasm of entrepreneurs, and stimulate buyers who just need to buy a home to enter the market, thereby promoting economic stability and growth.
For some countries, U.S. interest rate cuts can help stabilize global financial markets and ease capital outflow pressures from emerging markets.
However, whether the United States will cut interest rates in June or not is still in a swing stage, and was originally prepared to raise interest rates. However, the strong performance of the U.S. job market, the rising inflation rate, and the controllable risk of volatility in the U.S. financial market have made it less necessary for the Fed to cut interest rates.
It is reported that the timing of the first interest rate cut in the United States may be postponed to the fourth quarter of 2024, and it is even possible that there will be no interest rate cut in 2024.