China News Service, September 25th (Xie Yiguan, China-News Financial Reporter) Under the background of global "high inflation", countries have resorted to "killer tactics" in order to curb prices.

This week, as the Federal Reserve raised interest rates, many countries intensively announced interest rate hikes, and a new wave of "interest rate hikes" hit the world.

Central banks announce interest rate hikes

  On the 21st (Wednesday) local time, the Federal Reserve announced to raise interest rates by 75 basis points, raising the target range of the federal funds rate to between 3.00% and 3.25%.

This is not only the fifth rate hike this year, but the first time since 2008 that it has exceeded 3%.

Data map: Federal Reserve Chairman Powell.

Photo by China News Agency reporter Sha Hanting

  After the Federal Reserve announced to raise interest rates, it quickly set off a "wave of interest rate hikes" around the world.

On September 22, the Bank of England, the Swiss National Bank, the Norges Bank, the Central Bank of South Africa, the Central Bank of the Philippines, the Central Bank of Vietnam, the Bank of Indonesia, and the Central Bank of Qatar announced interest rate hikes.

  Among them, the Swiss National Bank, the Central Bank of South Africa and the Central Bank of Qatar all raised interest rates by 75 basis points, in line with the Federal Reserve; the Bank of England, the Norges Bank, the Philippine Bank and the Bank of Indonesia chose to raise interest rates by 50 basis points; Refinancing rates and deposit rates were raised by 100 basis points each.

Prior to this, Sweden's central bank has taken the lead in raising its benchmark interest rate by 100 basis points.

  A reporter from China-Singapore Finance and Economics found that many central banks have raised interest rates several times during the year.

For example, the Bank of England announced a rate hike for the seventh time this year, the largest rate hike since 1995; the Central Bank of South Africa raised rates for the sixth time in a row since last November; the Central Bank of Qatar raised rates for the fifth time this year.

  However, in this round of "interest rate hikes", there are also central banks that "do nothing" or even cut interest rates.

  On September 22, the Bank of Japan announced that it would continue to adhere to the current ultra-loose monetary policy and maintain the interest rate level unchanged; Turkey lowered the benchmark interest rate by 100 basis points to 12% after cutting interest rates by 100 basis points in August this year.

Why did the "Super Central Bank Week" appear?

  A major reason for the intensive announcement of "interest rate hikes" by central banks in many countries is to curb domestic inflation.

  Since the beginning of this year, the monthly CPI in many countries has remained high, repeatedly hitting new highs and even historical records for many years.

  Taking the latest August CPI as an example, the US CPI in August rose by 8.3% year-on-year, higher than the market's expected 8.1%; Sweden's inflation rate reached 9% in August, the highest record since December 1991 again; the euro zone 8 The monthly adjusted CPI rose 9.1% year-on-year, the largest increase on record.

On April 5, local time, a customer passed by an egg container in a supermarket in San Mateo County, California.

Photo by China News Agency reporter Liu Guanguan

  In the face of "high fever and difficult to retreat" inflation and the "surging" living cost of residents, many countries can only choose to raise interest rates.

However, following the announcement of interest rate hike policy by the Fed, some countries also have the consideration of reducing capital outflow and supporting the exchange rate.

  "Although the Federal Reserve is manipulating its own monetary policy, the US dollar, as the world currency, will also affect the flow of international capital." Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, told Zhongxin Finance and Economics reporter, "U.S. interest rate hikes may make the whole country The world's capital flows to the United States, and ultimately harvests global capital and trade, including the monopoly of the industrial chain."

  This year, the Federal Reserve has tightened monetary policy many times, driving the appreciation of the US dollar, while non-US dollar currencies have depreciated to varying degrees.

Statistics released by the World Bank show that in the first seven months of this year, 23 of the 27 currencies other than the U.S. dollar, including the euro and the British pound, depreciated against the U.S. dollar.

  On the 21st, after the Federal Reserve announced its interest rate decision, the US dollar index hit a 20-year high.

On the 23rd local time, the US dollar index even stood at the 113 mark, continuing to hit a new high in 20 years.

At the same time, the euro fell below 0.97 against the dollar, continuing to hit a new low since January 2002.

On the 22nd, the South Korean won also fell below the 1,400 won mark against the U.S. dollar, setting an intraday record low in 13 years.

  In order to prevent excessive currency depreciation, in addition to raising interest rates, some countries have or are preparing to conduct foreign exchange interventions.

  On the 22nd, the Japanese government and the Bank of Japan announced to intervene in the foreign exchange market by buying yen and selling dollars.

Recently, South Korean Finance Minister Chu Kyung-ho made an urgent statement that he will mobilize all possible measures to deal with unilateral fluctuations in the foreign exchange market, and will take necessary measures on foreign exchange when necessary.

Recession, debt crisis to follow?

  In order to curb inflation, the pace of interest rate hikes by the Federal Reserve and others will not stop there.

  "At present, the United States is still in the middle of the interest rate hike channel, and there is still a lot of room for interest rate hikes." Dong Dengxin said.

The "dot plot" reflecting Fed officials' interest rate expectations also shows that the federal funds rate is expected to rise to 4.4%, 4.6%, and 3.9% in the next three years.

  As far as market analysis is concerned, many countries may maintain the pace of interest rate hikes in sync with the Fed to curb inflation and stabilize exchange rates.

"Most central banks around the world raise interest rates at the same time to deal with inflation, which may push the world economy into recession." According to a study released by the World Bank earlier.

  The World Bank also expects that this will bring a financial crisis to emerging market and developing economies, causing lasting damage.

  Zhang Monan, chief researcher of the Institute of American and European Studies of the China Center for International Economic Exchanges, pointed out in an interview with China-News Finance that the external debt ratio of emerging economies is usually relatively high. debt repayment pressure.

  Raghuram Rajan, a professor of finance at the University of Chicago Booth School of Business, also said, “Many countries have not experienced a cycle of significant interest rate increases since the 1990s. Lending operations have added to the debt further.”

  "If the dollar appreciates further, it will be the straw that breaks the camel's back," said Gabriel Stern, head of emerging markets research at Oxford Economics.

  Previously, under the dual pressure of a sharp depreciation of the local currency and high debt, Sri Lanka had declared bankruptcy.

There are also many countries on the brink of debt crisis.

  International Monetary Fund (IMF) President Georgieva said at a recent event that as financial conditions tighten and the dollar appreciates, 25% of emerging markets are in or near debt distress, and more than 60% are in debt distress. of low-income countries face debt distress.

  “Historically, the U.S. interest rate hike cycle and the U.S. dollar strengthening cycle have often been the trigger for emerging market debt crises, such as the Latin American debt crisis in the 1980s and the Asian financial crisis in 1997,” said Luo Zhiheng, chief economist at Yuekai Securities.

  Luo Zhiheng believes that the risk of a debt crisis in emerging markets with fragile domestic economy, large exchange rate depreciation, imbalance of international payments, high short-term debt, and political instability continues to increase, especially Argentina, Turkey, Hungary and Poland in Eastern Europe. And non-oil-producing countries such as Egypt in the Middle East are at higher risk.