According to economists, the American economy has officially entered a "technical recession". "Technical recession" means that an economy takes the year-on-year growth rate of gross domestic product (GDP) as its technical parameter. When this main parameter is negative continuously, it indicates that the host country has entered a "technical recession". Since the global financial crisis in 2008, the mark that distinguishes whether it can enter a "technical recession" is that the growth rate has been negative for two consecutive quarters.
It is generally believed that after the disintegration of the Soviet Union, Russia was the first economy to experience a "technical recession" in statistical analysis. After the financial crisis, Greece, Iceland, Spain, Italy, Japan and other countries have fallen into technical recession. The last technical recession in China was during the global financial crisis in 2008.
This is the fourth time the Fed has raised interest rates this year, and it is also the second time to raise interest rates by 75 basis points. Such a continuous sharp interest rate hike has aroused great concern from the outside world, fearing that the difficulties brought about by the increased risk of economic downturn in the United States will spread all over the world and be passed on to all parts of the world.
On July 27, Powell, the current chairman of the Board of Directors of the Federal Reserve, responded to questions from the news media at a press conference, saying that although the economic growth rate of the United States has slowed down, the job market is still strong, and she does not think that the United States has entered a period of economic downturn. However, he admitted that the path for the Fed to prevent recession and complete its "landing" has become smaller and is likely to become narrower.
Because the US economy ranks first in the world, accounting for more than 20% of the world economy, the US dollar plays a decisive role in the international currency, and the Federal Reserve has become a de facto global central bank. Under the trend of economic globalization, the Fed's interest rate hike is bound to have a major impact on the world economy. In fact, the Fed's measures to raise interest rates continuously in response to high inflation in China may trigger financial risks in many countries and may lead to global economic recession. Specifically, this influence will be reflected in the following aspects.
1, raising interest rates will lead to the depreciation of the dollar, which will lead to financial crises in many countries. Although the Federal Reserve is a "global central bank", its decision to raise interest rates is based on "American priority". In the context of the general recession of the world economy, the Fed's unilateral determination to raise interest rates must be based on giving up the rights and interests of other countries and cutting off the "amaranth" of other countries.
The world economy is facing various downside risks when the epidemic has not been controlled this year and the conflict between Russia and Ukraine has led to a sharp increase in energy demand. The tight monetary policy of the Federal Reserve has made the global economy unbearable, and will eventually have a scale effect on emerging economies and developing countries, which will not only make some developing countries desperate, but also damage the economies of some capitalist countries. Reuters stressed that raising interest rates again by the Federal Reserve's equity funds may further aggravate the risk of regional capital outflow and currency depreciation.
2. Currency devaluation around the world will trigger a debt crisis. At this stage, the interest rate hike of the US dollar has led to a large outflow of funds from emerging economies, a sharp depreciation of cash and high debts. Therefore, the probability of large-scale debt default in the global economy has greatly increased this year. The appreciation of the dollar will make it difficult or even impossible for developing countries to pay interest on debt denominated in dollars, and some countries that rely on cheap imported goods may also be in a dilemma.
The adverse impact of the Fed's interest rate hike has prompted capitalist countries to fall into it. In recent years, affected by the accelerated tightening of the Federal Reserve, the yen has depreciated by about 20%, and the soaring energy demand has further impacted the Japanese economy, and the deficit has continued to expand. As of June, Japan has had a trade deficit of 1 1 month, and the trade deficit in the first half of the year may set a new record.
According to the International Monetary Fund, as the central banks of developed economies such as the United States raise interest rates to solve inflation, the global financial environment continues to tighten, which may trigger a debt crisis in emerging and developing economies. On July 26th, the agency lowered its global economic growth forecast for 2022 and 2023 to 3.2% and 2.9% respectively.
3. The Fed's interest rate hike may lead to the recession of the American economy and even the global economy. The specific manifestations of the economic downturn are as follows: First, due to the shortage of funds, the planned reproduction of enterprises is blocked, and some enterprises may be shut down or semi-shut down due to lack of assets, or even declare bankruptcy seriously. China's real economy will see a wave of bankruptcy around the world.
Secondly, under the background of economic downturn, due to the insufficient start-up of enterprises, the increase in manufacturing costs and the decline in economic benefits, the income of the people has been greatly reduced, the unemployed population has improved, and the living standards have declined, leading to a deep contraction of consumption power and eventually inflation, thus accelerating the economic downturn and pushing all social and economic development into a vicious circle.
4. The impact of the Fed's interest rate hike on China's economy. Because the long-term development trend of China's economic fundamentals will not change, and the impact of the Fed's interest rate hike on the RMB exchange rate is relatively limited, although the interest rate hike will lead to a recent decline in the annual interest rates of China and the United States, and capital flows will cause interest rates to oscillate, the important factor of the core RMB exchange rate is the change of the economic fundamentals of the two countries.
At present, China's balance of payments is basically balanced, export trade is running well, cross-border e-commerce assets are flowing in an orderly manner, and the attractiveness of RMB assets is further enhanced. On this basis, the RMB exchange rate has been strongly supported. Therefore, the impact of the Fed's interest rate hike on the RMB exchange rate is limited, and the change of the Fed's fiscal policy will not affect the main theme of China's monetary policy.
However, in the second half of the year, due to the deterioration of the international environment caused by the Federal Reserve's interest rate hike and the global economic recession, China's real economy will once again encounter the difficulties of financing, which will affect the process of economic recovery and further expand the difficulty of achieving the economic growth target in the second half of the year.
4. Conclusion According to the report released by the International Monetary Fund on July 27th, the global economy encounters many downside risks, including rising energy demand, uncontrollable inflation rate forecast, worsening global financial environment and debt problems of emerging market economies except China.
According to the monitoring data of Bloomberg on July 28th, the yield of 10-year foreign exchange bonds in 23 representative emerging market countries, including Turkey, has increased by about 10- 15% since June 2022, and the debt risk has soared, which has sounded the alarm of sovereign debt default. It is not difficult to see that the greater risk brought by the Fed's interest rate hike this time is that it may trigger a debt crisis in developing countries. So, what do you think of the official announcement of economic recession in the United States?