The epidemic has led to uneven global recovery. China and the United States lead the global recovery, but the recovery of other developed and emerging markets is slow, and the economy still needs relatively loose policy support. At the same time, the world is experiencing extremely rare high inflation, pushing monetary policy to raise interest rates. Since the fourth quarter of 2021, the Fed's expectation of raising interest rates has continued to rise and triggered financial market turmoil. Central banks in more than 30 economies around the world have begun to raise interest rates. China's economy is facing triple pressures of "shrinking demand, supply shock and weakening expectations". The policy is "dominated by me". The people's Bank of China has continued to cut interest rates in the near future, and will also cut reserve requirements and interest rates in the follow-up. Second, there is a dislocation of China US policies. Will the world enter the interest rate increase cycle in 2022? What are the reasons behind it? What impact will it have on the global market in the future?
I. reasons for the global interest rate hike cycle: anti inflation in developed markets and anti risk in emerging markets
The shift of monetary policy to the cycle of interest rate increase needs to comprehensively consider three factors: economic growth, inflationary pressure and financial risk. In 2021, the bottleneck of the global supply chain pushed up inflation, and the expectation of raising interest rates in the United States increased. Some developed markets raised interest rates to fight inflation, while central banks in emerging markets chose to raise interest rates to prevent risk.
1. The United States: the U.S. economy has reached the peak of recovery, with record inflation, close to full employment and clearer epidemic situation, which are the driving forces of the Fed's turn. In 2022, it is expected that the Fed will still follow the three stages of "taper - interest rate increase - table contraction", but the operation may be more intensive, the interest rate increase is more frequent and the table contraction is more advanced. In March, taper ended and began to raise interest rates. In June, it raised interest rates again and announced the schedule reduction plan. The Fed's shift to the interest rate hike cycle will exert downward pressure on the global economy and financial markets.
2. Other developed markets: due to the increasingly severe inflationary pressure, the central banks of developed economies such as Britain, Norway and South Korea have started to raise interest rates. However, the European Central Bank is constrained by fiscal sustainability, financial stability and weak economy, while the Central Bank of Japan is constrained by weak inflation and the slow pace of monetary policy interest rate increase. The poor construction of economic growth and inflation is the reason for the different rhythm of monetary policy normalization in developed economies. However, the recurrence of the epidemic and the intensification of anti globalization make it difficult to alleviate the global supply chain problems in the short term. The global energy transformation is also the goal of major economies. In the future, the inflation center will remain low and gradually rise, which will also promote the interest rate hike in Europe and Japan as soon as possible, and still end the era of "low inflation and low interest rate".
3. Emerging markets: emerging economies with high economic dependence on foreign countries have accelerated interest rate hikes with the intention not only to combat the risk of imported inflation, but also to prevent financial risks such as capital outflow, exchange rate depreciation and foreign debt. In the fourth quarter of 2021, the Fed's expectation of raising interest rates began to ferment, and the risk of capital outflow from emerging markets increased. The special deletion is that Latin American economies have high external dependence and high degree of internationalization of financial markets, so they are forced to raise interest rates in advance and many times. In 2022, the monetary policy of emerging markets has a difficult trade-off between ensuring economic recovery and not preventing risks.
4. China: Despite the growing concern of the United States about tightening expectations, China's monetary policy adheres to "stability first and focus on me". The dislocation of China US monetary policy lies in the dislocation of economic cycle. In 2021, thanks to the global leadership in epidemic prevention and control, China took the lead in completing the recovery cycle and realizing the normalization of monetary policy. At present, China chooses steady growth while the United States chooses anti inflation. No matter how the policy demands of China and the United States differ, the starting point is to consider the changes of the economic situation. In 2022, it is expected that the deviation between China and the United States will end in the second half of the second year. The current interest rate cut and the subsequent credit easing policy of the second base will stabilize and rebound in the second half of the year, and the interest rate spread between China and the United States will also hit the bottom and rebound.
II. The impact of the global interest rate hike cycle: the real interest rate of US bonds rises, US stocks kill valuations, and emerging markets are under pressure
1. The impact of the interest rate increase cycle on the U.S. financial market: the more than expected evolution of the Fed's interest rate increase and table contraction is the core driving force for the fast and wide rise of the real interest rate of U.S. bonds, and it is also the fuse of market panic. In 2022, the volatility of global financial markets intensified, the yield of US bonds rose to the pre epidemic level, and the upward range of US bond interest rate in January was close to the panic period in 2013. The upward rhythm of US bond interest rate is accelerated, and the upward real interest rate will lead to the differentiation of US stock market and have a greater impact on overvalued growth stocks.
2. The impact of the interest rate hike cycle on emerging economies is reflected in the real economy and financial markets. At the economic level, first, raising interest rates will push the financing costs of enterprises in Gosuncn Technology Group Co.Ltd(300098) economies and suppress economic recovery; Second, the fiscal policy will coordinate with the adjustment of monetary policy, and the support for economic activities will be weakened. At the market level, first, the US dollar interest rate hike cycle triggered cross-border capital outflows, exacerbated exchange rate depreciation and financial market turmoil; The thing is that the interest rate hike cycle will increase the debt repayment pressure of emerging economies and raise the risk of sovereign debt. Economies with high external debt pressure and high trade deficit and government deficit are most vulnerable to the impact of interest rate hike cycle.
Risk tip: the global epidemic has exceeded expectations, and the global inflation has exceeded expectations
