In 2022, the Federal Reserve began to raise interest rates 1 time. In just a few months, the Federal Reserve has raised interest rates five times in a row, and the rate of interest rate increase for the next three times is 75 basis points. Before this, the Federal Reserve has never raised interest rates so sharply, but this operation seems to have no impact on inflation in the United States, and the consumption demand of ordinary local people is still very strong.
To some extent, even though the Fed has already raised interest rates a lot, it has not chosen to stop raising interest rates, but is further expanding the rate hike. For the Federal Reserve, even though it knows that raising interest rates will affect the performance of the capital market, and may even bring about the economic recession in the United States, it has already indicated its determination to raise interest rates and hopes that the market can respond accordingly in advance.
The impact of the Fed's interest rate hike
1. Benefits to depositors: The interest rate of bank deposits will rise due to interest rate hikes, and the interest income of depositors will increase. In order to get higher returns, depositors may invest their savings in other fields, such as stocks, bonds and real estate.
2. Increased loan cost: Raising interest rates will increase the loan cost of enterprises and individuals, which is not conducive to stimulating loan demand. Enterprises may reduce investment and production capacity, and individuals may tighten large expenditures such as buying a house and a car.
3. The stock market is damaged: raising interest rates is usually not conducive to the stock market, because higher interest rates increase the financing cost of enterprises and reduce their profitability. In addition, raising interest rates may also cause investors to be disappointed with high-risk assets, thus affecting the stock market.
4. Reducing inflationary pressure: Raising interest rates may reduce money supply and tighten liquidity, thus reducing inflationary pressure. In a moderate range, inflation contributes to economic growth, but too high inflation rate may have a negative impact on the economy.