Key investment points:
Looking back on the previous six interest rate hike cycles, it is currently or more similar to 2004 / 06
Since 1980, the Fed has roughly experienced six interest rate hike cycles, and the core of each interest rate hike is to control inflation. Although there are differences in the core contradictions and macroeconomic conditions behind it, we have also found the following "common" laws: first, most of the previous interest rate hikes began in the upward period of the US economy, and the growth momentum of China's economy is very strong, and most of them are in the stage of continuous enhancement. Second, starting the interest rate hike may not be able to curb the continuous rise of prices in the short term. Most inflation data will gradually fall after the end of the interest rate hike cycle. Third, during the interest rate hike cycle, the unemployment rate continued to fall. This interest rate hike is similar to the macroeconomic situation when the interest rate hike cycle was started in June 2004, mainly in the following aspects: first, the sudden events in the early stage triggered the Federal Reserve to cut interest rates sharply. Before the interest rate hike, the economy experienced a strong recovery for a period of time. China's demand was booming, animal prices rose rapidly, and the low interest rate environment prompted the real estate market to recover first. Second, similar geographical conflicts, production cuts by oil producing countries and rapid global recovery have led to the continuous rise of international crude oil prices.
The rhythm and intensity of this interest rate hike are unprecedented, and the probability of policy mistakes of the Federal Reserve has increased
This interest rate increase also has obvious particularity. First, the Fed's latest forecast of economic growth in 2022 is 2.8%, which is not low. The US economy is still far from "stagflation". At present, it is still in the stage of overheating, but the growth rate may have begun to peak. Second, the downward space of the unemployment rate has been very limited. The strong operation of economic activities has maintained the high demand for labor by enterprises. It is expected that the tight pattern of labor supply and demand will continue. Third, it is difficult to "cool down" high inflation in the United States in the short term. In addition to the fact that the tight labor supply will continue to drive the rise of wages, the nominal wage itself is sticky and will not be adjusted rapidly with the marginal change of labor supply and demand pattern, but will remain high. In addition, the year-on-year growth rate of PPI in March reached 11.2%, a new high since 2010. Under the tight balance of supply, it is very easy to be transmitted to the consumer side, with the rise of animal prices.
The Fed is currently facing a dilemma. On the one hand, if the tightening is not enough, it is likely to completely generate the wage price spiral, which is difficult to effectively curb the upward trend of inflation. On the other hand, the driving force of maintaining high economic growth has begun to fade, excess savings have begun to be consumed, and the unemployment rate can not be reduced, which weakens the role of "continuous improvement of employment income to support U.S. economic growth". If the strong contraction continues, it is likely to lead the economy into recession. The depth of real interest rate is negative or can give the fed some space, but we still need to be vigilant about the impact of marginal changes in interest rate on market expectations. The intensity of this tightening is unprecedented, but looking back on the performance of the Federal Reserve in the past, it is likely to adjust the policy according to market changes and fluctuations. We predict that the interest rate hike in this year will show the former eagle and the later dove, and the rhythm and intensity of interest rate hike may be eased from the fourth quarter. At the same time, we are reminded to be alert to the risk accumulation in super tightening.
