Is the crisis over? November 2, 17:36
March 15, 2020 is an unforgettable day.
Sunday evening immediately after the new coronavirus spread tremendously in the United States and a "national emergency" was declared.
The Federal Reserve Board, the central bank, held an emergency meeting and decided to introduce zero interest rates and quantitative easing.
He took a breather at one of the largest monetary easing measures released in anticipation of the impending crisis.
It's been over a year and a half since then.
The Fed is trying to decide on a "shrink" for this crisis response.
What will that policy shift bring to the US and global economies?
(Washington bureau reporter Yosuke Yoshitake / Asia general bureau reporter Keita Kage / Manila bureau chief Masashi Yamaguchi)
Stopped the spread of the crisis
Powell
"has played an important role, but it's time to shrink."
At a press conference on 22 September, Fed Chair Powell acknowledged that quantitative easing had finished its role and announced that he would take a policy shift at the next November meeting.
Quantitative easing is a policy in which the central bank buys government bonds and securities from financial institutions and supplies a large amount of funds to the world.
It was introduced as a crisis response during the 2008 Lehman shock.
It is often evaluated that the quantitative easing introduced to stop the economic collapse caused by the pandemic was successful in terms of timing and scale.
Last year, more than 20 million people lost their jobs in the United States, and the unemployment rate and economic growth rate fell to the worst levels after the war.
Nevertheless, when vaccines became widespread in early spring and economic activity resumed, the economy turned to a strong recovery.
It can be said that the country's huge fiscal stimulus and the Fed's monetary easing helped prevent the prolonged economic downturn.
The Fed also determined that the economy had made progress.
The policy is to gradually reduce the "amount" of government bonds purchased through quantitative easing and to complete the policy itself in about half a year.
Isn't everything as expected?
If crisis response is over, it's positive for the US economy.
However, Chair Powell's expression is dull.
That is because the disturbing movements that cover the US economy are related to the background of this policy change.
Nadym Karil, who runs a huge discount store in Midwest Ohio, lamented:
Nadym Karil
"It's the first time in 26 years since the company was founded to raise prices."
The store is lined with 99 cents of merchandise.
It's a 100-yen shop in Japan.
However, since mid-October, the number of items that cannot maintain 99 cents has increased rapidly.
Winter mufflers and gloves have been raised to $ 1.39, and shampoos and detergents have been raised to $ 1.29.
This is because the increase in the purchase price could not be absorbed by cost reduction, etc., and "exceeded the limit".
Prices are rising in the United States now.
Moderate price increases associated with the economic recovery are desirable.
However, the rate of increase in consumer prices has been in the 5% range, which is much higher than the Fed's target of about 2%, for five months from May.
Powell, who has repeatedly said it was a temporary phenomenon, finally said on October 22 that "it is likely to last longer than expected."
The background is the delay in imports from Asia, which continues to be affected by the new corona, and the shortage of domestic labor.
The shortage of raw materials and materials due to this turmoil is causing “bad price increases”.
As it has been pointed out that inflation may not be temporary, there is growing concern within the Fed that continued strong monetary easing could spur inflation and accelerate inflation.
This is believed to have led to the decision to “reduce mitigation within the year”.
The Fed will reduce its economic support, leaving the turmoil of the new corona in the United States.
Currency depreciation already occurring
Adrian
"If the Fed misses the speed of policy shifts, it will have a particularly big impact on emerging economies."
The impact on emerging countries where the IMF (International Monetary Fund) sounds the alarm bell.
The best of these is the "depreciation of the currency".
There are increasing observations that the financial markets will start raising interest rates next year, looking ahead to the time when the zero interest rate policy will be lifted, which will be the next step after the Fed's quantitative easing and contraction.
These observations have led to the return of funds to the United States, which has led to a stronger dollar.
On the flip side, currencies are depreciating in emerging economies.
A depreciation of the currency may disrupt the economies of emerging countries through rising prices of imported goods.
Emerging countries in predicament
In some countries, recovery from the corona disaster has been delayed and high prices are affecting the lives of citizens.
The Philippines, an island country in Southeast Asia.
In the Philippines, which relies on imports not only for energy such as gasoline but also for rice, which is the staple food, prices will continue to rise sharply.
The consumer price index increased by 4.9% in August, the first increase in 2 years and 8 months.
You will realize it when you visit the citizen's kitchen and the fresh market in Manila, the capital.
Looking at the prices listed in the store,
・ Common fish, 1 milkfish = 170 pesos (about 380 yen)
・ Chinese cabbage, carrots, etc. = 100 pesos (about 220 yen)
・ Broccoli 1 kg = 400 pesos (about 880 yen)
According to data from the public market in Manila, carrot prices are 1.3 times higher, Chinese cabbage is 1.6 times higher, and broccoli is doubled compared to six months ago.
The reason why even domestic products are rising is that transportation costs are rising due to the rise in the price of crude oil that relies on imports.
A clerk at the vegetable counter
"If the price goes up any more, I'd like to cut out the rotten part of the vegetables that have deteriorated a little and put them out in small pieces. Anyway, if the price is not reduced, no one will buy it."
Pork is "golden"
I met an unemployed woman who came to buy food with a stern look.
Unis Montoya (27).
In an apartment in Manila, four people live together with a friend who is also unemployed.
The daily meal cost for four people is set at 1000 pesos (2200 yen).
However, due to rising prices, it has become difficult for four people to fill their stomachs with this food cost.
On this day, I made stir-fried chicken for lunch.
I used to be able to add plenty of ingredients such as pineapple to onions, eggs and potatoes, but now I can't.
Simply add soy sauce to chicken and onions and simmer in water.
It is said that if you do not continue to eat three meals until lunch the next day, you will exceed your budget.
Montoya's
"higher than the chicken pork, no longer is something golden like for us. No more should not reduce the meal if the prices go up. Life is tough."
The factors behind the rise in prices are complex, such as the rise in global energy prices.
However, if the Fed raises interest rates and the currency depreciates further, it will increase the burden on these people.
Awaiting challenges, steering to be asked
It cannot be said that the United States has escaped from the turmoil of the corona, and it is essential to keep an eye on emerging countries, which are in a more difficult situation.
There will be many challenges on the road to "normalization" of monetary policy by the Fed.
In particular, rising prices are likely to complicate matters.
Powell wants to maintain zero interest rates for the time being to support the slow-moving US economy, but if prices continue to rise more than expected, an "early rate hike theory" will emerge.
Is it possible to realize a "soft landing" that stabilizes the economy and suppresses excessive inflation?
This steering will also have a major impact on the Japanese economy, which faces challenges such as soaring gasoline prices.
Washington Bureau Reporter
Yosuke Yoshitake
Joined NHK
Nagoya
Broadcasting
Station in
2004
After working at the Ministry of Economic Affairs, he is currently affiliated.
Keita Kage
,
Directorate-General of Asia
Joined in
2005 In
charge of financial and financial coverage at the Ministry of Economic Affairs, and has been in charge
since the summer of 2020.
Manila Bureau Chief
Masashi Yamaguchi
Joined in 2006
After working at the Utsunomiya Bureau and the International Department, he has been working
in Vietnamese
since
2018.