[US]Fed's aggressive rate hike has spillover effect on the world!

Cheng Guojing, Economic Daily

On June 15, local time, the Federal Reserve announced an interest rate hike of 75 basis points. Behind the Fed's aggressive rate hike is its high level of inflation. Under the pressure of rising global energy and food prices, the US CPI rose by 8.6% year-on-year in May, hitting a 40-year high. Under the weight of high inflation, the Federal Reserve has aggressively raised interest rates.

Adjustments in the Fed's monetary policy will have spillover effects globally, especially for emerging economies. Looking back at history, when the Fed's monetary policy is easing, emerging economies will experience increased liquidity, currency appreciation and rising asset prices; conversely, when the Fed's policy "pendulum" turns tighter, emerging economies may experience a painful contraction process, which may lead to capital outflows, financial market shocks, currency devaluation, asset price declines, etc.

For China, the current fundamentals of our economy are stable and the financial system is generally healthy. From the latest price data, CPI rose at a flat rate, PPI accelerated downward, the overall level of inflation can be controlled, the price level is much lower than the United States and Europe and other major economies. There is still room for monetary policy operations and there is no need to be overly concerned.

However, it should also be seen that China is still facing greater downward pressure on the economy. Next, China's monetary policy still needs to focus on me, and the previous policy measures to stabilize growth should be accelerated to take effect and stabilize the macroeconomic panorama of China. Monetary policy should continue to play both aggregate and structural functions to guide financial institutions to increase their credit support to the real economy. At the same time, it is also necessary to take into account the internal and external balance, pay close attention to the adjustment of monetary policy in major developed economies, effectively do a good job to ensure supply and price stability, protect food production, and prevent the risk of imported inflation.