Xinhua News Agency, Beijing, October 1st. Roundup: Global negative spillovers from Fed rate hikes continue to expand
Xinhua News Agency reporter
Affected by the continuous aggressive interest rate hikes by the US Federal Reserve, under the pressure of intensified inflation and depreciation of local currencies, many countries have recently followed the Fed’s pace to raise interest rates, and the global negative spillover effects of the Fed’s interest rate hikes have continued to expand.
The Fed announced last week that it would raise the target range for the federal funds rate by 75 basis points to a range between 3% and 3.25%. This is the Fed’s third consecutive rate hike of 75 basis points this year. Before and after the Fed’s rate hike this time, central banks in some countries and regions raised interest rates sharply.
This week, the Central Bank of India announced on its official website that it would raise the benchmark interest rate by 50 basis points to 5.9%; the Central Bank of Mexico announced that it would raise the benchmark interest rate by 0.75 percentage points to 9.25%; the Central Bank of Hungary raised interest rates by 125 basis points, raising the benchmark interest rate from 11.75% It was raised to 13%, the highest since the country’s benchmark interest rate since 2000.
Gabriel Pérez del Peral, head of the Economics Department of Mexico’s Pan American University, said that the United States is a typical unilateralist when it comes to formulating monetary policy in disregard of the interests of other countries. Continued rate hikes by the Federal Reserve will adversely affect the economic development of Latin America and the world.
To curb inflation, Sweden’s central bank announced last week that it would raise its benchmark interest rate by 100 basis points to 1.75%. This is the largest increase in the benchmark interest rate by the Riksbank since 1993. Subsequently, the Bank of Japan decided to maintain the loose monetary policy unchanged, but the Ministry of Finance of Japan rarely directly intervened in the foreign exchange market to prevent the yen from continuing to depreciate. The Swiss National Bank raised interest rates by 75 basis points more than expected on September 22, and the Bank of England raised interest rates by 50 basis points on the same day.
Ian Berg, a professor at the Institute of European Studies at the London School of Economics and Political Science, said that if the UK wants to avoid a sharp depreciation of the pound, it has to try to follow the pace of US interest rate hikes. “Americans make economic policy in response to the situation in the United States, and they don’t take into account the impact on other countries.”
Also last week, South Africa’s central bank raised its benchmark rate by 75 basis points to 6.25%; Indonesia’s central bank raised its benchmark rate by 50 basis points to 4.25%.
Dendi Ramdani, an economist at Bank Mandiri in Indonesia, said the aggressive rate hikes by the Federal Reserve have led to high imported inflation in emerging economies, dragging down economic growth. The move strengthened the dollar, but heightened uncertainty in global financial markets, curbing investment flows and increasing pressure on emerging market currencies to maintain stability.
The World Bank’s research report released in mid-September found that global central banks are raising interest rates at a level not seen in the past 50 years, a trend that may continue into next year, sending the world economy into recession and hurting emerging market and developing economies. bring financial crises and cause lasting damage.
In addition, the European Central Bank raised key interest rates twice in July and September this year, raising interest rates by a total of 125 basis points. European Central Bank President Christine Lagarde said a few days ago that the central bank is expected to raise interest rates further in the next few meetings to curb demand and prevent inflation from continuing to rise.
Guido Traficante, a professor of economics at the European University in Rome, said that the aggressive interest rate hikes by the Federal Reserve have driven the dollar to continue to rise, which has negatively affected the European economy such as a weak euro, increased inflationary pressures, and capital outflows. For some time to come, the negative spillover effects of the Fed’s aggressive rate hikes will not be eliminated.
[Editor in charge: Yan Yujie]