Finance And Economics Special Topic: The Federal Reserve Raising Interest Rate Has Traces To Follow.

The Fed's rate hike is not expected to be a good thing for emerging markets.

The Yuan's exchange rate is even more uncertain due to the market or aggravating turbulence.

"Do not guess the world every three months.

The Fed should have forward-looking guidance rather than global speculation.

On the 18 day, Yao Yudong, director of the central bank's Financial Research Institute, made a speech as a scholar.

He gave three trigger conditions.

For example, if the US PCE does not exceed 2, or the consumer price index (CPI) does not exceed 2.5, it does not raise interest rates; secondly, the unemployment rate of the United States is not less than 4.5% without raising interest rates.

Moreover, unless macro prudential measures are exhausted, the risk of stock market and real estate bubbles can not be stopped, or interest rates will not be raised.

Next, how will the relevant assets behave? Not just two statutory objectives.

The zero interest rate that has lasted for nearly seven years has not ended.

Since the beginning of the financial crisis in 2008, the Federal Reserve has reduced the federal funds rate (the interest rates of savings banks overnight to their reserve positions) to zero.

It seems that the reasons for raising interest rates and not raising interest rates are quite sufficient.

Logically, for the current 5.1% unemployment rate index, the Fed has no fear of raising interest rates.

In fact, the Federal Reserve policy rate corresponding to the unemployment rate in history is above 3%.

But for the purpose of stabilizing prices, the US consumer price index CPI is only 0.1% (12 on average in the past 12 months).

On the surface, this is far from the inflation target of the Federal Reserve's monetary policy of 2%.

The Fed has two major statutory monetary policy objectives, namely, full employment and stable prices.

But Hong Pingfan, director of the development policy research division of the United Nations Department of economic and social affairs, says this is not the whole story.

If we go deep into the analysis, we will find that the trend of inflation in the US is not far from the Fed's inflation target.

The story may be this: the Fed's inflation index is not the consumer price index CPI, but the "PCEPI". Hong Pingfan believes that the latter can more fully reflect the actual impact of inflation on consumers than the former.

The second line is: from the perspective of monetary policy, the Fed should focus on "core PCEPI", that is, PCEPI after excluding energy and food prices.

Why should we eliminate energy and food prices? Hung Tong explains that this is because the price of energy and food tends to fluctuate in the short term, and most of the fluctuations are caused by changes in supply factors, which do not respond to changes in demand, and therefore have little to do with monetary policy. Monetary policy is mainly managed by demand.

"PCEPI is currently around 0.3% yen, higher than CPI, and" core PCEPI "has averaged 1.5% over the past 12 months, which is not far from the Fed's 2% inflation target.

Hong Pingfan thinks.

Besides, monetary policy must be forward-looking.

"The 2% inflation target of the Federal Reserve does not refer to the inflation rate in the past year, but the inflation expectation in the next 1-2 years."

Hong Pingfan said.

In its view, quantifying the objectives of "full employment and stabilizing prices" and linking them to monetary policy tools largely depend on the ability of the chairman and members of the Federal Reserve to analyze and judge.

Of course, Hong ordinary does not think that when the economy is in full employment and price stability, the central bank should raise interest rates.

The consideration is that if the policy of "full employment and price stability" corresponds to the neutral interest rate policy, the central bank should not do anything.

But if the policy interest rate of "full employment and price stability" is still extremely stimulating, it should raise interest rates.

He further explained that although the "full employment and price stabilization" is not a general reason for raising interest rates, it should be the reason why the Fed will gradually normalize the zero interest rate policy after the outbreak of the financial crisis (the normal level of the Fed's policy interest rate is around 3%), and from the crisis state to the normal state.

In fact, the Federal Reserve's monetary policy is not only considering its statutory employment and inflation targets, but also considering the stability of the financial market.

But the Fed's concern is not whether the stock market falls itself, but whether the stock market downturn will lead to (or behind it implies) financial market liquidity tightening and systemic crisis.

Song Weiguo, an international family fund manager, believes that the international factors and the risk of financial capital market are also important, especially the Chinese factor, besides the two main objectives of the Federal Reserve.

The Federal Reserve has temporarily raised interest rates, but has rarely called China's attention.

Yellen explained that the financial market in August reflected China's risk to a certain extent, and the important emerging markets were all negatively affected.

The Fed focuses particularly on risks in China and emerging markets.

But Yao Yudong believes that the United States should pay attention to "emerging markets outside China" rather than "China and emerging markets".

FOMC has no interest in raising interest rates, and the global market is mixed.

The Dow Jones industry and the S & P 500 fell 0.39% and 0.26% respectively, while the Nasdaq composite index closed up 0.10%.

But Brent crude fell 1.71% to $48.90 a barrel, while NYMEX crude fell 0.93%, to $46.73 a barrel.

US bond yields fell sharply, yields on us 10 - year treasury bonds fell 3.19% to 2.229, and us 30 - year treasury bonds rose by more than 1 points, and their yields rose to 3.026%.

As of Beijing time on September 18th at 8 hours, COMEX gold pulled straight up, or 1.21%.

The US dollar index was 94.63, a slight increase of 0.058%.

In fact, by sorting out the recent rounds of the Fed's interest rate hike, the Huachang macro finds that the US dollar index will gradually strengthen in the first 6-9 months before raising interest rates, and the US dollar index will fall after raising interest rates, and will not regain strength until about 8 months later.

Historical law shows that the rate hike expectations have been advanced and fully reflected.

If the Fed announces the rate increase in September, the dollar will weaken in the light of past experience. If the conference does not raise interest rates, then the interest rate point will be pushed to the end of the year. The US dollar index will still have room to rise, but it is difficult to rise sharply, and the US dollar index will remain volatile during the year.

Future

There will be some support.

Zhong Zhengsheng's logic is that, before the recent visit of President Xi Jinping to the United States, the central bank will not make a difference in the exchange rate issue. Secondly, the dollar index will continue to be volatile in the year, and the suppression effect on the RMB exchange rate will not be too great. Finally, the current account surplus in the medium and long term will continue for a period of time, which will support the RMB.

During the year, the RMB exchange rate will not appear again.

Liu Dongliang, senior analyst at China Merchants Bank's financial headquarters, believes that the prospect of devaluation depends on economic expectations.

In the short term, the Fed's failure to move to a certain extent relieves the devaluation pressure of the RMB, and the pressure on the central bank to intervene in the exchange rate will also be reduced. The RMB exchange rate is expected to remain stable in the short term.

In the medium term, the Fed's entry into the interest rate cycle will push the US dollar strong cycle to continue to develop. The US dollar is expected to remain strong in the 4 quarter to next year, and there is room for further appreciation. This will increase the devaluation pressure from the external environment.

Whether the market's expectation of RMB depreciation can be dispelled and whether the RMB exchange rate can be stabilized ultimately depends on the domestic economy.

Otherwise, under the downward pressure of the economy, the current stable trend of the RMB is probably fragile and vulnerable.

Liu Dongliang said.

In the case of non US dollar currencies, the weaker US dollar boosted the euro.

Last week (7-11 September), the euro closed against the U.S. dollar at 1.1334, rising 1.7%, reaching a two week high.

The US interest rate outlook is weaker, and the weaker US dollar boosted the euro.

When Zhou Delagi said that the European Central Bank could extend the QE period or expand the scale of QE according to the inflation trend, the euro rose to some extent.

and

Similarly, the weaker dollar is good for the pound.

In the 7-11 week of September, the pound fell to 1.5425 against the US dollar, rising 1.7%.

The performance of the pound also depends on the economic data to be announced, which will be boosted if it is better than expected.

"Plus the Bank of England is about to enter the interest rate cycle. Even if the Federal Reserve raises interest rates in September, the pound may become the only currency against the US dollar."

Zhong Zhengsheng thinks.

The yen is different - because it is depressed by increased risk appetite.

This week, the US dollar closed 120.55 against the yen, rising 1.3%.

"Some time ago, the global stock market fluctuated, and the yen as a hedge asset was sought after.

But on the 7-11 day of September, the global stock market rose, the yen was suppressed and the depreciation rate was larger.

"If the Bank of Japan unexpectedly takes more relaxed policies, the yen will be plunged sharply."

The Australian dollar's counteroffensive is only a short-term rebound.

On the 7-11 day of September, the Australian dollar closed at 0.7091, rising 2.6%.

According to Huachang's macro view, the Australian dollar finally staged a counterattack after a month's devaluation.

This is mainly due to the stabilization of the stock market in the week and the relative rational return of investors to China's economic expectations.

Fundamentally speaking, the Aussie will continue to suffer from easing policy and economic trend in the future.

It is worth mentioning that Yu Pingkang believes that the cost of postponing raising interest rates is far less than the harm caused by false increases in interest rates.

But the US Federal Reserve keeps interest rates unchanged. This will instantly increase the risk appetite of convergence in the US capital market, push up the rebound of asset prices, and will also aggravate the turbulence of emerging markets, increase the uncertainty of the RMB exchange rate, and worsen the situation of capital outflow in China.

Yang Ling, general manager and chief strategist of star stone investment, said that the Federal Reserve's temporary interest rate increase is good news for China.

Because the pressure of RMB depreciation has been smaller, the outflow of hot money has been improved.

Extremely nervous

On the afternoon of September 17th (Thursday), more than a dozen hours before the Fed's interest conference, the A shares plunged suddenly, and the Shanghai Composite Index fell 3086.06.

The market believes that the risk aversion caused by the Fed's announcement of interest rate increases in the morning is "the cause of diving".

However, the US market in the trading session rose all the time; Europe and Africa in the Middle East - only FTSE 100 fell 0.43% and Switzerland SMI fell 0.26%); the Asia Pacific market - the Shanghai composite index only lost 2.10%, while Hang Seng closed 21854.63, or 0.51%.

In fact, on Wednesday (September 16th), there has been a marked change in the market.

Easy-forex is easy to believe in Sun Yucheng, the chief Trading Officer of China's headquarters. In the 30 hours before the interest rate is announced, the non US currency collectives go up, while gold and silver rise retaliatory, giving the fed a hint that the Fed will not raise interest rates.

At the same time, the stock market has also been strong, which has strengthened the speculation.

Yes, the market is no longer so noisy. These signs indicate that the probability of raising interest rates by the Federal Reserve in September is not large, and the market is not mistaken.

In September 12th, Gundlach, a new debt king, issued a live webcast of the Double-line fund, stating many reasons why the Fed could not raise interest rates.

The last time the Fed raised interest rates was nearly ten years ago, the new debt King illustrated in charts that the negative impact of raising interest rates is very large, like commodity prices falling, emerging market index weakness, market turbulence and so on.

Song Weiguo said.

Specifically, the interest rate implied by the federal benchmark interest rate futures is only 30%.

The trend of the US high yield debt ETF JNK price over the past five years shows that the high yield debt has been sold, and the trend of the MSCI emerging market stock index in the past 10 years has shown that raising interest rates will bring more trouble to these markets.

Including a big drop in the commodity index, suggesting that the economy is at risk of deflation.

"The Federal Reserve generally increases interest rates in nominal GDP by more than 4%, and now it is 3.3%."

Song Weiguo said.

Not only that, the Bloomberg financial market sentiment index and Goldman Sachs financial market sentiment index are deteriorating, implying pressure on the financial system.

In fact, the chief executive of the International Monetary Fund and the world bank have publicly warned of the danger of raising interest rates and urged the fed not to raise interest rates.

But there are also central bank governors of emerging market countries who think that "pain is not as bad as short pain". FED is better off giving them a knife -- landing boots with interest rates, so that the market will be temporarily stable.

Because the currencies and capital markets of these countries are subject to rising interest rates.

However, the spillover effect of emerging economies is unlikely to become an important factor in the decision of the Federal Reserve's monetary policy.

According to Hong Pingfan, from all indicators, after the US stock market fell 10% in August, there was no sign that the risk of credit crunch and systemic crisis increased significantly, similar to that of the 2008 financial crisis, which is not enough to affect the Fed's monetary policy.

For a long time, zero interest rates have caused different risks. Financial asset allocation and price structure are distorted to a certain extent. The Fed's interest rate increase will certainly fix the financial asset allocation and price structure.

"As long as these changes do not significantly increase the financial system crisis, they should not become an important consideration for the Federal Reserve to adjust monetary policy."

Hong Pingfan said.