China News Agency, Beijing, September 22 (Reporter Xia Bin) The pace of interest rate hikes by the Federal Reserve has not stopped, nor has it become smaller.

  In the early morning of the 22nd, Beijing time, the Federal Reserve announced to raise interest rates by 75 basis points, raising the target range of the federal funds rate to between 3% and 3.25%.

This is the fifth time the Fed has raised interest rates this year, and the third time in a row to raise interest rates by 75 basis points. Such a rate hike is extremely rare in intensity and intensity.

  Although the operation of raising interest rates by 75 basis points again was within market expectations, what exceeded expectations was the Fed's signal on the future rate hike process.

  Judging from the statement released by the US Federal Open Market Committee (FOMC), members unanimously agreed to the decision to raise interest rates.

The latest dot plot shows that the Fed expects there is still 125 basis points of room to raise interest rates between now and the end of the year, and in the medium term, the federal funds rate may remain high for a longer period of time.

The market believes that the dot plot has sent a clear signal that future rate hikes will remain high and last longer.

  Cheng Shi, chief economist of ICBC International, said that under the assumption that U.S. inflation will decline by an average of 0.1 percentage points month-on-month, U.S. core inflation is expected to remain above 6% in September-November, while core inflation in October-December is expected to remain above 6%. Inflation is also expected to remain at 5.77%.

Judging from Fed Chairman Powell's speech and the Fed's latest rate hike expectations, the Fed's long-term terminal interest rate is expected to exceed 4.5%.

  Powell said that in order to achieve the goal of lowering inflation, the U.S. economy does not rule out the possibility of entering a recession and the labor market will also weaken, but this is "pain to bear", and in the long run, if price stability cannot be restored, it will bring "more How painful."

  Fed officials have also publicly acknowledged that the more they raise interest rates to quell inflation, the greater the risk of hurting economic growth and jobs.

Powell said last month that it "would cause some pain for families and businesses."

  In order to solve the domestic inflation problem, will the "pain" caused by the Fed's interest rate hikes be transmitted outward?

Li Zhan, chief economist of China Merchants Fund Research Department, believes that the sharp increase in interest rates by the Federal Reserve will undoubtedly constrain the monetary policies of other central banks, especially emerging economies. Emerging economies had to follow suit.

  Zhang Ming, deputy director of the Institute of Finance of the Chinese Academy of Social Sciences, said that there is a lot of evidence that US prices will remain at a high level for a certain period of time.

Therefore, in terms of prices, the Fed's interest rate hike and balance sheet reduction will not end in the short term.

  "From the perspective of the global situation, uncertainty, the epidemic, the expectation of the Fed raising interest rates and shrinking the balance sheet still exist, and some emerging market countries may experience a financial crisis in the future, which will also support the US dollar exchange rate." Zhang Ming said.

  Zhong Zhengsheng, chief economist of Ping An Securities, said that the aggressive tightening of the Federal Reserve and the breaking of the US bond interest rate to the previous high will have a more severe negative impact on non-US financial markets, and the performance of non-US currencies will be even more affected, such as the pressure on the European and Japanese bond markets. It will also be reflected in the euro and yen exchange rates.

  Pang Ming, chief economist and research director of JLL Greater China, also believes that considering the US economic recovery and labor market are still at a relatively satisfactory level, the Federal Reserve continues to insist on relying on the aggressive interest rate hike cycle to curb inflation momentum, the dollar in the short term. There is a high probability that the index will continue to maintain an upward trend, which may lead to the return of funds from emerging markets and other major developed markets to the United States, which will continue to put pressure on non-dollar asset prices and non-dollar currency exchange rates.

  Fed's monetary policy tightening, how should China respond?

Pang Ming pointed out that, considering that China's macroeconomic volume is currently expanding and its resilience is stronger, the market-oriented reform of the exchange rate has made China more resistant to external shocks, and at the same time, the autonomy and stability of the financial system are also improving. The impact of a strong dollar on China limited.

  "However, in order to more effectively deal with the external shocks caused by the strong dollar, we should strive to do a good job in cross-cycle design." Pang Ming said that on the one hand, we should continue to deepen the market-oriented reform of the RMB exchange rate, enhance the flexibility of the RMB exchange rate, and strengthen expectation management. Improve the macro-prudential management of cross-border financing, guide market players to adhere to the concept of "risk neutrality", and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

  The People's Bank of China recently issued a document stating that the next step will continue to implement a sound monetary policy, adhere to the principle of self-centeredness, seek progress while maintaining stability, take into account stable employment and prices, internal and external balance, and strengthen the foundation for economic recovery and development. Engage in flood irrigation and not overdraft the future.

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