Strong dollar is putting pressure on developing world economies (Getty)
Signals were issued on Wednesday evening following the decision to raise the interest rate by half a percentage point Federal Reserve BoardThe Central Bank of America confirms that the bank is proceeding with its plan to hike the dollar interest rate, and that there is no cap on that hike as long as there is a rise in the inflation rate accompanied by growing concern that the The US economy will enter the tunnel of inflationary stagnation, and perhaps recession, as happened in 1939.
This is because the Federal Bank is well aware that fighting runaway inflation must be a top priority for economic and monetary decision-makers, and that dealing with high prices is much more important than the goal of increasing the growth rate and improving economic indicators.
The Fed confirms that it will not end its interest rate hike campaign aimed at controlling hyperinflation anytime soon
Among these signs, Federal Reserve Chairman Jerome Powell confirmed that the bank would not end its interest rate hike campaign aimed at controlling inflation any time soon, and that “we still have a long way to go down that road, and the pace of interest hike at the next February meeting will depend on economic data.
And in firm language and far from any expectation that the Fed will halt or freeze the plan to raise interest rates, Powell said: “We will not consider cutting interest rates until we are sure that inflation is slowing towards the 2% target in a sustainable way. Restoring price stability will likely require maintaining a tight policy stance for some time.”
Among the signals also the US Central Bank forecasts that the interest rate will reach 5.1% next year, up from the previous estimate issued last September of 4.6%, which means that it will continue to increase the rate in upcoming meetings.
The central bank’s open market committee also confirmed that it would be appropriate to continue raising interest rates, in order to achieve a sufficiently tightening stance to bring inflation back to the 2% target over time.
Thus, the Fed will continue to raise the interest rate through mid-2023, and possibly until the next meeting in September, and possibly beyond, and prevailing inflation rates will determine the rate of increase and the timing of its setting or reduction in a second moment. time.
With war in Ukraine, inflation and supply chain crises continuing to slow, central banks should not stop the wave of rate hikes
It seems that with the continuing crises of the war in Ukraine, the inflationary wave, supply chains and the economic slowdown, it is not expected that the major global central banks, including the Federal Reserve, will stop the wave of rate hikes interest.
The latest forecasts in this regard indicate continued inflationary pressures on the main economies, issued by one of the largest investment banks in the world, Goldman Sachs, which forecast, at the end of last week, an increase in commodity prices of more than 40 % in 2023.
Furthermore, the energy crises and the economic war with Russia and the scarcity of raw materials from oil to natural gas and minerals will exert strong pressure on the economy of the old continent in 2023, which will push the European Central Bank to accelerate the wave by raising interest on the euro, noting that the bank raised the interest rate by 0.50% on Thursday, to raise the price from 1.5% to 2%, the highest level since global financial crisis of 2008.
Repeat with Central Bank of England Who on Thursday raised the interest rate for the ninth consecutive time, to the highest level since 2008, in light of his efforts to address the high inflation that exceeded 10.7% last November, the highest level high in 41 years.
Rising interest rates on major currencies, including the dollar, euro, pound sterling and Swiss franc, will cause More trouble for economies and currencies Emerging markets, which rely on global markets to manage dollar liquidity, close financial gaps, cover budget deficits and pay wages and salaries.
This is because the increase entails additional burdens on external lending operations in developing countries, and also a shortage of foreign liquidity in those countries’ markets, with hot money fleeing and investment from it directed to Western markets for benefit from high returns and guarantee and political stability.
