The Fed and its global audience believe that 2024 will be a good opportunity for interest rate cuts. But it turns out that today, price inflation is much more stubborn than almost everyone's prediction, and these expectations are rapidly fading. The Federal Reserve Chairman Jelm Powell confirmed this on April 16. At that time, he said that after a series of unexpected high inflation data, policy makers will wait for a longer time than previous expectations.

There will be only one or two interest rate cuts this year. This is a huge disappointment compared to the three measures expected to be introduced earlier this year and the three measures formulated by Federal Reserve officials in March. Some investors and economists said that this year may not cut interest rates at all.

Delayed the relaxation of monetary policy -and "maintaining a higher level for a longer period of time" -has a significant impact on the US economy. It also echo around the world.
 

1. What makes inflation high?

When inflation reaches a peak of more than 7%in 2022, it reflects the widespread increase in commodity and service prices. But now, as the overall inflation has fallen below 3%, the price increase is mainly driven by the continuous shortage of housing. The price of commodities and auto insurance premiums also promote the stickiness of inflation to maintain the 2%goals of the Fed.

Powell himself sent a signal of interest rate cuts prematurely, which ignited the optimistic emotions of the financial market and promoted economic activities. The following is a detailed analysis of these factors:

About one -third of the consumer price index (CPI) houses have proven to be the most stubborn category. Although the Bureau of Labor Statistics, Zillow Group Inc. (A real estate company based on the Internet) and some more timely indicators of the Apartment List (apartment rental trading platform) show that the growth of new rental rent is declining, but the corresponding components in CPI have not yet reflected this.

The price of energy, especially the price of oil, rose in the first quarter after most of the time last year. The upgrade of the Middle East War may push them higher. The rise in oil prices has led to rising gasoline prices. Electricity prices are also rising. Although central bank officials are more willing to consider the core inflation that eliminates the price of energy prices due to the volatility of energy prices, it turns out that the soaring price of oil and other raw materials cannot be ignored because it can be reflected in more expensive shipping shipments And product.

Insurance costs are another driving factor for high inflation. The insurance of tenants and homeowners is growing at the fastest speed in nine years, and car insurance has soared 22.2%in the year as of March, the highest level since 1976. One key reason is that the current car technology is more complicated, so the maintenance cost is higher.

Powell said in December last year that "obviously" interest rate cuts were a topic of discussions in the United States, which stimulated a large number of bets on market interest cuts. The effect of this remark is equivalent to 0.14 percentage points at a rate cut, and it will also increase this year's CPI about half a percentage point. Powell "is now considering the possibility of anti -inflation stagnation, and the threshold for cutting interest rate cuts may have improved." This has increased the risk of not restricting interest rates this year, if the unemployment rate has not changed much compared with today. (Measured at historical standards, the current 3.8%interest rate is very low.)
 

2. What does "long -term interest rate hike" have a domestic impact on domestic?

The benchmark interest rate of the Federal Reserve affects the lending cost of each interest rate range. Powell said that the Fed may maintain interest rates at the current 5.25%to 5.5%level, which means that buying and car purchase loans will continue to be much more expensive than the Federal Reserve's start to raise interest rates in 2022.

In fact, the US average mortgage interest rate for the first time this week exceeds 7%this year. The financing cost has hindered the recent momentum of the real estate market, because potential buyers are watching and seeing before the financing cost is relieved. In addition, the inventory is still very low, because many homeowners do not want to give up cheap mortgage loans they get when the benchmark interest rate is close to zero. This helps maintain a high listing price.
 

3. How does the Fed's policy affect other parts of the world?

For the International Monetary Fund in Washington to participate in the International Monetary Fund (International Monetary Fund) this week, Powder's latest steering has caused a difficult situation. If the European Central Bank, Bank of England, and the Reserve Bank of Australia can promote their loose cycles, they may reduce their currency -push the import price and destroy the import price and destroy them. Reduce the progress of inflation. But not relaxing the policy may lead to slowing growth.

The European Central Bank plans to cut interest rates for the first time at the June meeting. The British Central Bank may take a longer time to turn interest rate cuts, and traders will cut interest rates for the first time in autumn. Officials of the Bank of Canada have stated that the central bank's interest rate reduction rate and speed of interest rate cuts are limited without the Fed issued a clearer signal. The Bank of Canada is approaching interest rate cuts.

Lucy Baldwin, director of global research at Citi Group, said that the risk is that the longer we see these large central banks waiting for interest rates, the greater the risks faced by the potential economy.

The long -term high of the US dollar on other currencies has maintained a strong US dollar, because the prospect of continued high interest rates in US interest rates has made investment in US securities more attractive on the basis of relative value, leading to appreciation of the US dollar. Therefore, every time the US dollar goes higher, the situation of developing economies will become more difficult, especially for those economies with US dollar valuation debts, with the depreciation of their currencies, the cost of repaying these debts has become higher.

The Bank of Indonesia (Bank Indonesia) has had to raise interest rates in October after a round of continuous currency weakness. The Bank of India said it had intervened in the foreign exchange market after falling below the 16,000 rupees in the four years of the rupee. For countries from Malaysia to Vietnam, economists are now expected to cut interest rates smaller. For Malaysia, this is because its output data shows that the economy is recovering momentum. The Vietnamese Bank also had to sell US dollars to support its currency.