Securities Times reporter Wei Shuguang

  After the Fed raises interest rates by 75 basis points again, how far will the future rate hikes go?

Fed Chairman Jerome Powell has made it clear that interest rates will be higher in the future and for longer.

  On November 2, local time, the Federal Reserve raised interest rates by 75 basis points at the November interest rate meeting as scheduled, and the federal funds rate after the rate hike reached a new target range of 3.75% to 4%, the highest level since 2008.

At the subsequent press conference, Powell poured cold water one after another, making the tightening expectations heat up again.

Powell believes that with the policy rate already rising to 4%, more important in the future than the speed of rate hikes is the height and duration of rate hikes.

With employment and inflation data still strong, future interest rate highs will be higher, and interest rates will stay high for longer.

  Obviously, Powell is telling the outside world not to underestimate the risk of the Fed continuing to raise interest rates.

Based on Powell’s remarks, the median policy makers’ forecast for the peak rate of interest rates is expected to rise to 5.125% at the Fed’s meeting in December.

As a result, the dovish expectations that have repeatedly appeared in the market have also been shattered, promoting the double killing of stocks and bonds in the capital market.

The Nasdaq index fell by more than 3% in a single day, the 10-year U.S. bond yield rose from below 4% to 4.12%, while the U.S. dollar index rose and returned to above the 112 mark.

  In fact, judging from the three key indicators that the Fed pays attention to, inflation in the United States is still running high.

The U.S. added 263,000 nonfarm payrolls in September, and the unemployment rate fell to 3.5%, the lowest level in nearly 50 years.

The consumer price index (CPI) rose 8.2% year-on-year in the month, and the core CPI rose 6.6% year-on-year, the largest increase in 40 years.

The Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index, rose 6.2% year-on-year in September; the core PCE index rose 5.1% year-on-year, still staying at a nearly 40-year high.

  However, while the Federal Reserve is further tightening the currency, the US government is continuing to carry out fiscal expansion, hoping to provide fiscal stimulus through industrial policy, significantly increase the consumption of local photovoltaic materials and wind power in the "Inflation Reduction Act", and support and subsidize photovoltaics and new energy vehicles. industrial chain, and still maintain a high tariff policy on imported goods.

  This "split" macro combination will only make it more difficult for the United States to manage inflation, making the Fed's effectiveness in fighting inflation by raising interest rates greatly reduced.

The high level of the above-mentioned key inflation indicators in the United States has fully demonstrated that a smooth path of interest rate hikes cannot effectively curb high inflation.

As a result, the Fed has had to further delay the timing of the policy shift, and the front for rate hikes has been significantly stretched.

  The prolonged time for the Fed to raise interest rates will further impact the global economic and financial operations, accelerate the risk exposure of currency exchange rates and capital flows in some vulnerable economies, and further expand the time and space for global financial markets to adjust.

Global investors should be highly vigilant and always guard against risk spillovers caused by the Fed's sharp interest rate hikes.