Huatai Solid Revenue: Does the Federal Reserve Lead Global Monetary Policy?
This article comes from the core point of view of the WeChat public account “Poker Investor”. The downward pressure on the global economy has doubled in 2019. The Fed is the first to release a dove signal to boost confidence.
In Europe, the European Central Bank has ruled out interest rate hikes from the summer of 2019 to the end of the year.
Since February of this year, India, Australia, Egypt and more have joined the ranks of pigeons, and the world has gradually turned in synchronization.
We believe that the traction of US monetary policy on developed economies is significantly greater than that of emerging economies (especially in the interest rate cut cycle).
China ‘s monetary policy has been “mainly within” in the past 20 years. We expect China ‘s monetary policy to be “loose” this year, but it will not follow blindly because of the rapid “turning dove” of the United States.Excessive water discharge.
Developed economies have a high degree of policy synergy, the relative fragmentation of emerging economies and the global global economic cycle have greatly increased their relevance, and the spillover effects of US monetary policy have become increasingly prominent.
The economic fluctuations of developed economies have a fairly strong synchronicity, consistent timing of coordinated policies, stronger synchronicity 南宁桑拿 of interest rate cuts, and interest rate hikes are aimed at alternatives.
However, most emerging economies have divergences in economic cycles, financial cycles, and long-term cycles, and their monetary policies are poorly synchronized.
Unless there are a few times of financial crisis and facing capital outflows to counter the pressure, there will be short-term follow-up behavior.
The United States has a small spillover of China’s monetary policy. China insists on mainly observing the implementation of China-US monetary policy in the past 20 years. China’s monetary policy has been based on domestic economic and financial conditions for many times. It has little influence from the spillover of US policy and maintains a lot of independence.
The multi-objective budget characteristics and floating exchange rate management 四川耍耍网 system also provide pressure and space for China’s monetary policy to be “mainly within”.
At present, the overall economy is at a stage of high-speed growth to expected changes, and GDP growth is gradually changing. China is gradually constrained by the policy goals of economic growth and financial stability, and it is unlikely that it will follow US monetary policy.
In 2019, China will adhere to the independence, stability and flexibility of its monetary policy every year. According to the implementation report of the fourth quarter monetary policy, the expectation that the monetary policy will remain stable and biased will remain.
Internal and external conflicts are mainly caused by internal equilibrium, and cross-border capital flows, exchange rate expectations and the operation of the foreign exchange market are basically stable, which is conducive to changing the “mainly internal” of monetary policy.
There is still a lot of room for monetary policy. QE is not necessary. The current focus is still to unblock the monetary policy intervention mechanism.
Risk warning: Sino-US trade friction escalates; the Fed raises interest rates higher than expected; Chinese debt risks erupt.
1. Will the US Federal Reserve transfer its pigeons to a global transition?
The Fed “faces”.
Since the end of last year, the Fed seems to have started the “transmutation” mode. The tone of the “normalization of monetary policy” has changed one after another. The pace of “turning pigeons” has even made the market somewhat unable to keep up.
First, Powell said that the interest rate level was relatively close to neutral, and then the official bitmap reduced the number of interest rate increases.
In December, a “reduction plan will continue to be adhered to”. At the AEA Annual Meeting and the FOMC meeting in January, Powell changed his mind to “the reduction policy can be adjusted to prevent disturbing market sentiment.”
The minutes of the FOMC meeting released on February 22 pointed out that “almost everyone agrees to make plans as soon as possible to end the shrinking of the table within the year”, which once again refreshed market expectations.
As of now, the CME Fed Watch shows that the market expects zero interest rate hikes in 2019.
The attitudes of leaders of various countries are gradually changing.
On the European side, the expansion of Europe, which has recently withdrawn from quantitative easing, has also changed its attitude in the face of economic cold winds.
In the fourth quarter of 2018, the GDP of the Eurozone increased by 0 quarter-on-quarter.
2%, a new low of nearly 4 years, the ECB has changed its interest rate hike expectations from the summer of 2019 to the end of 2019.
In addition, if the United Kingdom finally has no agreement to leave the European Union, or if other unknown risks occur and cause the euro area economy to experience a significant decline, the possibility of restarting easing in European restructuring will increase significantly.
On the Asian side, Japan will be more cautious this year as the downturn has failed to begin the normalization of the currency.
The Japanese budget does not expect to change its loose policy stance this year.
Emerging economies are even more “windy and rainy”. Since February, India has gradually cut interest rates unexpectedly by 25 basis points. The Swedish exchange has also issued a “dove” pie hint. Egypt is even more surprised to announce a 100% interest rate cut.Basis points.
In a short period of 3-4 months, countries around the world turned around and made the most “pigeon” sound since 2009.
As the economic cycle of countries around the world strengthens, as the world ‘s largest economy, the spillover effects of US monetary policy have become increasingly prominent.
Monetary policy spillover refers to the mutual influence of a country’s monetary policy on its own country, completely changing the transfer of global capital markets, commodity markets, international trade, etc. to foreign countries, and through further influence on other countries’ real economies, inflation, and exchange rates, thereby further developingThe monetary authorities’ monetary policy has formed an “intervention”.
Generally speaking, countries with high interdependence will therefore have a higher degree of policy coordination.
The question that this article wants to explore is: In the face of this round of global economic growth (or even recession), do the monetary policies of major countries have a high synchronization?
To what extent can US monetary policy affect other countries?
In particular, will China’s monetary policy be led by the Fed? 2. Which economies’ monetary policies are potentially affected by the US?
The monetary policies of developed economies are consistent with the US convention. Historically, the monetary policies of advanced economies have been synchronized, and the monetary policies of emerging economies have been independent.
For advanced economies, interest rate cuts are more synchronized, and interest rate hikes are more targeted at cameras.
In the Internet bubble of 2000 and the financial crisis in 2008, the Fed took the lead in cutting interest rates. Advanced economies such as Japan, Europe, Canada, and Canada all followed the Fed to cut interest rates significantly.
Since 2015, through the global economic recovery, the Federal Reserve has once again taken the lead in changing the direction of monetary policy and restarting the road of raising interest rates.
Montreal, Canada has followed suit, and began to raise interest rates in 2017.
It is expected that the European Central Bank’s actions will be slow and subject to the European debt crisis and internal political issues, the European Central Bank will withdraw from QE at the end of 2018, and the market is expected to start raising interest rates at the end of 2019.
Relatively decentralized monetary policies in emerging economies For emerging economies, the synchronization of monetary policies in various countries is poor.
In 1998 and 1999, Russia and Brazil respectively experienced financial crises. The changes in monetary policy were vertical, but they overlapped globally or regionally, and they had less impact on other countries.
After the 2008 financial crisis, China, India, and Brazil began to raise interest rates gradually in the first half of 2010, and the benchmark gradually returned to the level before the financial crisis.
However, countries such as South Africa and Russia have maintained low interest rates for a period of time after the interest rate cut. Only in 2014 have they started raising interest rates.
In addition, the general policy rates of emerging economies have increased, and the overall trend of US benchmark interest rates cannot be seen.
3. Why are the currencies and policies of developed economies affected by the United States?
The economic cycles of developed economies are more coordinated. From the perspective of economic transformation, developed economies are more coordinated, while emerging economies are differentiated.
The overall economic cycle changes we use the OECD comprehensive leading indicator. Because this indicator is different from the short-term economic changes that PMI focuses on, it better reflects the macroeconomic development cycle of a country. The focus is on capturing the speed of economic cycle expansion or contraction and the inflection point.Case.
According to this indicator, the standard deviation between developed economies is smaller.
From January 1995 to the present, the average monthly standard deviation of the four major economies of the United States, Japan, Europe and Canada is zero.
55, while China, Brazil, India and Russia are 0.
In addition, from the point of inflection, developed economies often occur simultaneously, while emerging economies are disorganized, and there may even be “collisions” between upward and downward inflection points, such as Brazil and India in October 2015.
In fact, we can attribute the degree of synergy between the cyclical changes of a country’s economy and the global economy (because G20 accounts for 90% of global GDP) based on the measurement of the overall correlation between countries and the G20 economy.
The specific method is: economic variable data obtained by BP filtering of the actual GDP of each country, and then calculating the dynamic correlation coefficient between the economic fluctuation of each country and the G20 overall economic fluctuation.
The data shows that the developed economies are quite synchronized with the overall economic changes, and the overall economic changes are basically driven by the United States.
Below the rankings, the correlation between emerging economies and the whole is less than zero.
5, indicating that the timing and period of its fluctuations are different from those of developed economies.
Financial cycles in developed economies are more synchronized. From the perspective of credit and asset price trends, developed economies are often more synchronized.
The financial cycle refers to the positive and negative feedback cycles of bank credit, asset prices (house prices, income, etc.) and the real economy. The financial cycle changes with the macroeconomic environment and policy framework.
For example, since the early 1980s, under more liberalized financial systems and seemingly more stable macroeconomic scales and monetary policies, the length and magnitude of financial cycles have increased.
In China and India, the financial cycles of the three economies, the United States, Europe, and Japan, remain highly synchronized. First, international capital flows are more easily referred to as “discriminating” when they are deployed in developed markets.”It varies from person to person”, showing that the correlation between liquidity conditions in developed economies is significantly higher.
For example, in terms of stock index trends, developed economies are consistent, while emerging economies have performed differently, especially in the past decade.
After the 2008 financial crisis, the stock indexes of developed economies all increased. Except for the Paris CAC40, the other stock indexes in 2018 exceeded the highest level before the 2007 crisis.
For emerging economies, the Brazilian and Indian stock markets surpassed their highest levels during the crisis in 2018, while the Chinese and Russian stock markets are currently close to their post-financial crisis lows.
Except that India and the US stock market have trended similarly in the past ten years, the stock indexes of the other three countries have changed and penetrated in the past ten years, and their trends have diverged.
Gradually moving towards a higher degree of synchronicity and precisely behind the consistency of monetary policy. Under the continued loosening of monetary policy, there is a high probability that asset prices will rise, and even asset bubbles will form. Once monetary policy shifts to pierce bubbles,The stock market is also immune.
The inflation cycle of developed economies is more uniform. Starting from the fundamental goal of monetary policy, inflation is a key factor affecting the orientation of monetary policy.
Then similar inflation cycles are more likely to give birth to similar monetary policies. For reference, developed economies have gradually entered the stage of economic growth and gradually deviated from the level. The rate of change has decreased, which provides a good environment for the coordination of monetary policies.
However, due to their own development stage and the rapid growth of currency issuance (M2 time), emerging economies have a large range of transitional changes and poor synchronization, which has caused their own monetary policies to be unavoidable in many cases.Taking into account domestic fluctuations, in a few cases (mainly during the strong US dollar period), the exchange rate pressure was finally dealt with.
4. History of China-US monetary policy and today ‘s analysis. According to the previous analysis, US monetary policy has a greater impact on developed economies than emerging economies. Although China is an emerging economy, China ‘s GDP has ranked second in the world (2007China ranks third in the world, and China has leapt to second in the world in 10 years).
In addition, China-US substitution is the world’s largest bilateral trade relationship. The re-emergence of macroeconomics and monetary policy will have a greater impact on each other and the world.
Especially in the context of the current global economic and monetary policy shift, it is even more necessary to analyze how the US monetary policy has affected China. We have reviewed the four major periods in history, so that we have an outlook for China’s monetary policy in the next stage.On the whole, China ‘s monetary policy has always maintained a high degree of independence. Policy formulation is based on the domestic economy, and it is unlikely that it will follow US monetary policy.
99-00 China-US monetary policy reversed the United States: The Internet bubble began in the late 1990s, the rise of Internet technology, technology-related stocks were sought after by investors, the capital market was “prosperous” by the Internet, and GDP remained at 4.
High growth rate of 5%, but the achievable growth rate far exceeds the rate of profit growth. A lot of bubbles have emerged in the Internet market, which is expected to rise significantly, with a CPI of 2%.
In order to curb the economy’s overheating and high inflation, the Fed started a rate hike cycle in June 1999 with a benchmark interest rate of 3.
25% to 6%, an increase of 275 BP.
China: Asian financial crisis In 1997, the weak domestic demand overlapped with the impact of the Asian financial crisis, and China’s economic growth was cold.
At the same time, liquidity was in short supply during this period.
The five-year period in 2001 remained low, resulting in insufficient base currency issuance.
In addition, commercial banks are subject to the dual pressure of insufficient capital and the reduction of non-performing assets, and the phenomenon of “poor loans” is obvious, and the entire economy has closed off relatively severe deflation.
Based on this, starting from the first quarter of 1998, the economy was stimulated by operations such as canceling the size of loans, drastically reducing the statutory reserve ratio, dating open market operations, and reducing interest rates several times.
In 1999-00, the United States adopted a tight monetary policy to curb the Internet bubble. However, in the context of the Asian financial crisis and lack of liquidity, China adopted a proactive monetary policy to stimulate the economy. Based on different economic fundamentals at home and abroad, China-US policies appearedObvious divergence.
04-06 China-US monetary policy is the same as that of the United States: The Fed from the real estate bubble began to reduce interest rates in early 2001, reducing the federal funds rate 11 times in a year (from 6).
5% dropped to 1.
Consecutive interest rate cuts stimulated credit, consumption and investment, stimulated the housing market boom, restored the U.S. economy from 2002, and maintained a low interest rate state. This state remained until 2003, but also spawned a large number of asset bubbles (especially the real estate market).) High prices).
In order to curb the overheating of the economy, starting from June 2004, the benchmark interest rate was raised 10 times (from 1% to 5).
25%), an increase of 425 BP, is a continuous rate hike process in the United States since 1980, and the highest interest rate in the United States since the terrorist attacks of 9/11.
China: After the internal and external pressures of the economy entered 2004, China’s economy maintained rapid growth, and the substitution problems of important raw materials, energy, and transportation gradually intensified. The pressure factors for the excessively rapid growth of the scale of currency and credit continued to accumulate.In the second half of the year, the monetary policy was raised once and the interest rate was raised once and the interest rate was recirculated.
After the exchange rate reform in 2005, the RMB implemented a managed floating exchange rate system. The cost of imported products that have appreciated with the RMB has decreased, the competitiveness of exported products has decreased, and hot money has poured into the market. Import breakthroughs have been highlighted.
Beginning in the second quarter of 2006, affected by the price reforms of refined oil products, natural gas, water, electricity, coal and other resource products, local governments have successively raised the price of water and electricity, leading to more serious problems.
In order to curb the conflict, the transition started from April 2006 to the end of the year, raising interest rates twice and raising the benchmark three times.
Both China and the United States adopted tight monetary policies in 04-06.
From the perspective of internal factors, after the exchange rate reform in 2005, the RMB exchange rate was subject to a floating exchange rate system, and the relative appreciation of the RMB led to an input growth rate.
At the same time, China ‘s commodity prices have risen due to the country ‘s domestic commodity price reforms. From the perspective of external factors, the degree of internationalization of the conversion currency has increased, and the synergy between China and the United States has increased.
Taking into account the domestic and international economic pressures, China’s transition has also adopted a tightening monetary policy, which was affected to some extent by the spillover of the Fed’s interest rate hike.
10-11 China-US Monetary Policy Reverses the United States: In order to resume QE, the US economy has not recovered from the 2008 subprime mortgage crisis. In November 2010, the United States opened a second round of simplified easing monetary policy.A total of US $ 600 billion of US Treasury bonds were purchased during the period, and the benchmark interest rate continued to remain at 0-0.
25% ultra low level.
China: Four trillion inflation In 2010, the previous four trillion investment stimulus led to the realization of inflation expectations. After February 2010, the CPI exceeded a reasonable range of 2% and continued to increase until October 5.
Economic growth has picked up, and the impact of the financial crisis has gradually subsided. Banks’ liquidity has been gradually restored by raising interest rates several times and tightening the money supply.
In the first half of 2011, the CPI rose continuously to 6 in July.
45%, raising interest rates several times in a row. At the end of 10, February and April 11 raised interest rates at the same time.
Since the beginning of austerity calculations in early 2010, this period has raised interest rates five times (in a range of one).
25 averages), 13 upgrades (a range of 5).
In 10-11, the US economy has not recovered from the subprime crisis, and the second round of QE has begun.
However, China was gradually affected by the previous 4 trillion fiscal effects. In order to curb growth and gradually implement a tight monetary policy, China’s monetary policy still insists on focusing on internal issues, and there is no so-called “following” operation.
In 15-18, China ‘s and US ‘s monetary policies reversed the U.S. ‘s interest rate hike and contraction. The Federal Reserve implemented three rounds of QE in the subprime crisis to rescue the market. A large amount of liquidity was released to drive the U.S. economy upward.The growth rate is 2%; and it is expected to be at a historical low with a CPI of only 0.
At 7%, the unemployment rate has continued to fall.
As the US economy gradually recovered from the crisis, the Fed decided to withdraw from QE, with the benchmark interest rate set to 0 in December 2015.
5% increased to 2.
With the continuous adjustment and increase of the benchmark interest rate, the economic growth of the United States has declined, and the pessimistic expectations of the economy have continued to ferment. Since December 18, the Fed has gradually shifted from an “eagle” to a “dove.”
China is stable and flexible in 2015. In 2016, there was a certain pressure on the economy. At the same time, due to the pressure of the “811 exchange reform” capital expenditure pressure, foreign exchange reserves and foreign exchange accounted for negative growth.
In the face of this set of contradictions, the use of operational tools to reduce the interest rate and cut interest rates and MLF and SLF continued to be used to place liquidity gaps in the market. Therefore, the monetary policy at this stage was stable and slightly loose.
2017 economic growth and inflation are within the target range, and gradually focus on shadow banking and financial stability goals. Therefore, the reserve ratio and benchmark interest rate tools have not been used, and more reliance on open market operations to “cut peaks and fill valleys” and “shorten“Longer growth” and increased macro-prudential management such as MPA. The monetary policy extended during this period was stable and neutral.
Since 2018, the downward pressure on the economy has gradually increased, and four targeted reductions have been gradually carried out to gradually enhance the understanding of “steady growth”, but at the same time, the bottom line of “de-leveraging” has not been relaxed. Therefore, monetary policy in this stage is stable and flexible.
The Fed officially withdrew from QE at the end of 15 based on good economic growth and suitable levels, and changed the good trend of economic recovery in the following three years. It adopted austerity monetary policy and basically completed the normalization of monetary policy.
As China ‘s high economic growth rate shifts to the expected course, the GDP growth rate has initially changed. Out of economic growth and financial stability policy goals, monetary policy remains stable and moderately flexible.
Raising on the Internet, the United States has little spillover influence on China’s monetary policy.
The outlook for China’s monetary policy in 1919 will continue to strengthen counter-cyclical adjustments, and monetary easing is expected to continue.
Among the highest goals, the downward pressure on the economy is prominent and may have become the focus of foreign exchange monetary policy.
The fourth quarter monetary policy implementation report pointed out that prudent monetary policy remained tight and moderate, continued to strengthen counter-cyclical adjustments, grasped the macro-scale degree, and achieved a comprehensive balance among multiple goals.
But this easing is a response to the fundamentals of the domestic economy, not a transfer by the Federal Reserve, let alone a radical shift by the Federal Reserve, and excessive radical relaxation.
When internal and external contradictions arise, the subject is balanced internally.
Looking at the current millennium macro-prudential policy, there are targeted measures, including strengthening communication with the market, increasing the reserve ratio for the risk of forward exchange sales, and restarting the “counter-cyclical factor” for mid-price quotes.Capital flows in the world, exchange rate expectations and the operation of the foreign exchange market are basically stable, and the RMB exchange rate has remained basically stable at a reasonable and balanced level, which is also conducive to the “domestic-based” exchange rate monetary policy.
Special supplements to key open market operating interest rates.
The focus of the market-based interest rate reform is to advance the “two-track and one-track” interest rate and improve the market-based interest rate formation, substitution, and substitution mechanism.
The long-term budget should strengthen the guiding function of the budget policy interest rate system, improve the interest rate corridor mechanism, and enhance the ability to convert interest rates. The focus is on increasing the replacement of the evacuation currency policy rate with the market rate and the credit rate.
Since the second quarter of last year, we have gradually maintained the stability of open market operating interest rates, consolidating the effect of the gradual return of money market interest rates to the bond and credit markets, creating a suitable monetary and financial environment for stabilizing the financing needs of the real economy and reducing the financing costs of private small and micro enterprises.
The possibility of timely adjustment of policy interest rates may rise.
The current money market interest rate continues to be lower than the open market policy interest rate, which is a result of the preliminary “leading down of the money market interest rate hub”.
In the process of converting the interest rate in the evacuation budget to the market interest rate and credit interest rate, the policy interest rate also needs to be adapted to the market interest rate. Therefore, the current high policy interest rate may need to be adjusted in due course.
The macro-policy effect has been reflected, and the whole has entered the policy effect observation period.
In general, the credit structure continued to be optimized, and loans for small and micro enterprises grew rapidly; restructuring, the inflection point of general loan interest rates, and physical financing costs significantly decreased.
Gradually released data on social meltdown, the gradual return of Sino-US trade is making progress, the average value shows that the effects of macro policies are gradually landing, and the effects of counter-cyclical adjustment measures are gradually appearing.
It may indicate that the effect of the current monetary policy operation has entered an observation period. The current stable monetary policy will continue, the urgency of policy overweighting will be reduced, and the structural monetary policy operation will continue to be strengthened.
Of course, it is necessary to formulate a stable monetary policy in the long run, which does not mean that it will remain unchanged. Otherwise, it will also dynamically adjust its monetary policy according to the macroeconomic budget.
Especially under the current transient conditions, monetary policy is expected to maintain a high scale.