Raise interest rates for the tenth time in a row! The Fed’s monetary policy is in trouble.

　　On May 3, local time, the Federal Reserve announced that it would raise the target range of the federal funds rate by 25 basis points to 5% to 5.25%.

　　This is the tenth rate hike by the Federal Reserve since March 2022, with a cumulative rate hike of 500 basis points.

　　Screenshot of Reuters report

　　At the news conference that day, Federal Reserve Chairman Powell explained that reducing the inflation rate to 2% is still the primary goal of the Federal Reserve.

　　Regarding whether the Fed will stop raising interest rates, Powell said that no clear decision has been made. He said that the current inflation rate in the United States is still much higher than the target of 2%, and the Fed may continue to raise interest rates in the future.

　　On May 3, Federal Reserve Chairman Powell spoke at a news conference. (Reuters related reports with pictures)

　　Wang Ruibin, deputy director of the Institute of World Economics and Development of China Institute of International Studies, said in an interview with Global Information Broadcasting of China Central Radio and Television General Station that the Fed raised interest rates again in order to "pull the reins" and curb the high level of inflation in the past 40 years, but continued interest rate hikes will damage the US economy.

　　Interest rate is an important policy tool with strong transmission effect. The impact of raising interest rates on economic life is various, and its direct role is to increase the borrowing cost of the economy as a whole.

　　Judging from the real estate market that has a great influence on the stability of the US financial system, this interest rate level supports the mortgage interest rate in the US real estate market to remain at a high level. At present, the interest rate of 30-year mortgage loan has risen from 3.6% at the beginning of last year to more than 6%, which directly increases the expenditure burden of buyers and inhibits the development of the real estate market.

　　For individuals, the credit burden of American consumers is also increasing, and the interest rate of credit cards will affect their spending enthusiasm and spending power. At present, the interest rate is climbing to the level of 25%, and the monthly interest expense may increase by about 40 dollars.

　　This result actually pushed up the overall debt level of the United States — — Whether it is the debt of the government, enterprises or individuals. Once out of control, the debt bubble is prone to burst risk, and even lead to systemic financial turmoil. In fact, there have been some direct signs. For example, recently, Silicon Valley Bank and First Total Bank in the United States have encountered serious operational risks.

　　Wang Ruibin further analyzed that in the face of complex economic situation, the Fed’s monetary policy will face difficulties in the future.

　　Whether this is the last rate hike depends on where the policy focus of decision-making bodies such as the Federal Reserve is at present.

　　Previously, the relevant focus was on the different evaluation of the effect of the first nine interest rate hikes on curbing inflation, but at present, more consideration has to be made. On the whole, the continuous interest rate hike has a negative impact on economic fundamentals, which will lead to a decline in loans, slow down economic growth, slow down investment and expenditure, and it is easier to stimulate the debt crisis. Especially after the bankruptcy of many banks, the risk of default on US federal government debt is rising. If the government stops paying some debts for a long time, it will lead to an increase in unemployment rate, and it will also lead to a rebound in inflation, which has been restrained at present, and the economy may fall into recession.

　　The national debt of the United States is the foundation of its entire financial system. At present, continuing to raise interest rates or keeping the federal funds rate within a reasonable range has been linked to the complex decision of whether and how to raise the debt ceiling. At present, in the "tool kit" of the Federal Reserve, no tool can fundamentally solve this problem alone. The problem facing the Fed is trade-off and balance, that is, how to temporarily reduce the threat of a certain aspect and exchange time for space.

　　Source: Global Information Broadcasting "Live World"

　　General Desk reporter Yang Zhuoying

　　Editor You Jia Yang Nan

　　Signing and Examining Liu Peng Liu Yiyao