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Lead
Recently, there have been voices in the market that the Federal Reserve may cut interest rates early, but Powell's statement is ambiguous, and the market is also indifferent about the direction of the US economy. However, there are three ominous signs that the US economy is cooling: the deterioration of US employment data, Japan's intervention in the yen exchange rate, and the continuous decline of the dollar index.
As the world's largest economy, the monetary policy of the United States has a profound impact on the global market, and the problems of the American economy are also bad news for the global economy. For developing countries, it is even more necessary to pay close attention to the changes in global monetary policy and take countermeasures to protect the stability of their currencies and economies.
So what kind of policy will the United States adopt to deal with the problems of the U.S. economy?
And what impact will it have on the global economy?
First, there are problems in the U.S. economy.
1. Deterioration in employment data.
The U.S. economic growth rate fell sharply in the first quarter of this year, from 3.1% in the fourth quarter of last year to 2.2% in the first quarter of this year, and even fell to 1.6% in the second quarter.
The U.S. economic growth rate once exceeded 3% in 2023, but in 2024, the economic growth rate will fall to 2.9%, and the economic growth rate has been declining since the fourth quarter of 2023.
U.S. employment data has also begun to deteriorate this year, according to the U.S. Department of Labor, the U.S. unemployment rate rose to 3.7% in April this year, compared with around 4% in October last year.
Non-farm payrolls also fell sharply in April, from 754,000 in March to 246,000 in April.
The U.S. economy grew at just 1.6% in the first quarter of this year, the slowest rate the U.S. has seen since 2024.
The main reason for such problems in the US economy is that the decline in the global economic growth rate has also exerted greater pressure on the US economy, and the US trade deficit has also continued to expand, which has also brought great difficulties to the US economic growth rate.
2. The U.S. dollar index continued to fall.
As one of the world's most important currencies, the U.S. dollar has a profound impact on the global market, and the U.S. dollar is one of the world's most important reserve currencies, and the impact of U.S. monetary policy on the global market cannot be underestimated.
The U.S. dollar index is the weighted average of the U.S. dollar against a basket of currencies, and the rise of the U.S. dollar index represents the appreciation of the U.S. dollar, and the appreciation of the U.S. dollar will have a greater impact on the global market.
The appreciation of the dollar will cause the global dollar debt to become more expensive, which will have a greater impact on the global financial market, and the appreciation of the dollar will also have an impact on the exports of developing countries, and the appreciation of the dollar will cause the products of the United States to become more expensive, which will lead to a greater impact on the exports of developing countries.
The U.S. dollar index has also continued to decline this year, and the U.S. dollar index has fallen below 95 for the first time this year, which is also the first time since the end of last year that the U.S. dollar index has fallen below 95.
3. Japan intervened in the yen exchange rate.
The economic problems in the United States have also raised concerns in Japan, which as an export-oriented country, has a relatively low economic growth rate and whose export industry is also an important part of the Japanese economy.
The decline in the U.S. economy has also had a great impact on Japan's export industry, and the appreciation of the U.S. dollar will also exert greater pressure on the appreciation of the Japanese currency.
When the dollar index fell below 95, the Bank of Japan said that it would intervene in the exchange rate of the yen to hedge against the appreciation of the dollar, because the appreciation of the dollar will lead to the appreciation of the yen, which will have a greater impact on Japan's export industry.
Japan's export industry has always played a great role in promoting Japan's economic growth, but the decline of the US economy will have a greater impact on Japan's export industry, which will have a greater impact on Japan's economy.
Second, the Federal Reserve may cut interest rates.
Problems in the U.S. economy are bad news for the global economy, and the Federal Reserve may take some measures to deal with the U.S. economy after the U.S. economy has problems.
The Fed's current policy rate is 2.5%, and in 2024, the Fed said it would raise its policy rate to between 2.75% and 3%, and the Fed only raised its policy rate to 2.5%.
The inflation rate in the United States is below 2%, which also shows that the inflation rate in the United States is not high, and the economic growth rate in the United States is still declining, which also indicates that the economy in the United States is not in a recession, and the Federal Reserve will raise interest rates to more than 2.75%, which may bring a greater impact on the American economy.
The Federal Reserve has said this year that it will not cut interest rates, but after the US economy has major problems, the Fed may change its original policy and lower interest rates to stimulate the US economy.
The Fed's policy moves and statements are ambiguous, Powell said in July that he would not cut interest rates, but after the April non-farm payrolls data came out, the Fed began to spread the news of interest rate cuts. The Fed's interest rate cuts could trigger volatility in global markets, and countries need to be prepared.
The Fed's interest rate cuts could trigger volatility in global markets, and the Fed's policy moves and statements will have a profound impact on global markets, and countries need to be prepared.
3. The U.S. may seek support from other currencies.
The Fed is likely to intervene in the US dollar at the same time as cutting interest rates, because the appreciation of the US dollar will have a greater impact on global markets, and the US dollar's status as one of the world's most important reserve currencies may be challenged. to maintain the dollar, but if the Fed wants to intervene in the dollar, it needs to be supported by other major currencies.
The Fed may seek support from other currencies to hedge against the negative effects of the US dollar's rate cuts, which may include the Japanese yen, the euro, the British pound and the Chinese yuan.
The U.S. exchange rate policy has a great impact on the global market, and for developing countries, it is all the more necessary to pay close attention to the U.S. monetary policy and take countermeasures to protect the stability of their currencies and economies.
epilogue
If the U.S. economy is in trouble, the Fed may intervene in the U.S. dollar when it cuts interest rates to maintain the status of the U.S. dollar and promote a soft landing for the U.S. economy, but if the Fed wants to intervene in the U.S. dollar, it needs to be supported by other major currencies.