Preface

As the global economy gradually recovers, many countries have begun to readjust their interest rates. The United States, however, has frequently changed its interest rates, revealing the true face of the American economy to the world. The interest rates in the United States have always been an important factor affecting the global economy because the US dollar, as the "world currency," is closely related to international trade. The policy of US interest rates has become an important benchmark for predicting the future direction of the Federal Reserve's policies.

The year 2024 is one we should look forward to, with the question of whether the United States will lower interest rates sparking a great deal of debate among economists. Discussions on interest rate hikes and cuts by the Federal Reserve have always been a global focus, affecting the decisions of other countries. However, in June 2023, the Federal Reserve raised interest rates again, bringing the benchmark rate to between 5.25% and 5.50%. This is already the 11th interest rate hike by the Federal Reserve in the past year, and this increase has brought interest rates to their highest point in 17 years.

Advertisement

What deep meaning does the Federal Reserve's decision to raise interest rates have?How has the Federal Reserve impacted the global economy?

The United States' choice of interest rate hikes.

The fundamental reasons for the Federal Reserve's interest rate hikes are primarily twofold.

Firstly, it is to maintain the "hegemony" of the US dollar and prevent the rise of other countries' currencies.

Secondly, the Federal Reserve uses interest rate hikes to ensure the stable growth of the US economy.

After all, there are many internal economic risks in the United States, so from the economic reports released by various institutions, we can see that the US economic problems are more severe.

From the relevant reports released by the IMF and several economic institutions, we can learn that the United States' debt has reached 35 trillion US dollars, and this figure is still increasing, and it is increasing at a rate of one trillion US dollars per year.

The United States' GDP has also reached 26 trillion US dollars, from which it can be seen that the extremely high debt level has seriously reduced the economic influence of the United States.

We can compare this with China's economy; China's debt level is only 62% of China's GDP, while the United States' debt level is as high as 135% of GDP.

This means that the health of the US economy is very low, and the potential level of crisis is very high.Despite the increased extent of interest rate hikes in the United States, there is still a necessity for the U.S. to raise interest rates. The primary reason for the U.S. to raise interest rates is to prevent an economic recession. However, the United States faces numerous reasons for a potential crisis. The first is high inflation in the U.S., followed by high unemployment rates and other debts. From this perspective, the U.S. economy indeed appears quite pessimistic.

The Federal Reserve, as the central bank of the United States, sets interest rates that are referred to as the benchmark interest rates. The Federal Reserve's decisions to raise or lower interest rates ultimately affect the rates set by other commercial banks in the United States. The interest rate increases brought about by the Federal Reserve's rate hikes can help curb inflation and enhance the attractiveness of the U.S. dollar, attracting more foreign investment to flow into the United States, thereby further improving the economic level.

However, high interest rates also have adverse effects on the development of the U.S. economy. High interest rates will lead to more people being unwilling to take out loans. As loans decrease, consumption will also decline, which in turn will cause the U.S. economy to slow down.So if the United States continues to raise interest rates, not only will the U.S. economy slow down, but it will also have a significant negative impact on the global economy.

The main purpose of the Federal Reserve's interest rate hikes is to suppress inflation.

In June 2022, inflation once reached a high of 9.1%, the highest level since 1970.

But now it has fallen back to a level of 3.7%.

When the high inflation in the United States falls back to the 2% level, the Federal Reserve will begin to consider whether to lower interest rates.

The upper limit of interest rates controlled by the Federal Reserve is 5.5%, and the lower limit is 5.25%.

Most expectations indicate that the Federal Reserve is more likely to continue raising interest rates once more.

After raising interest rates in July 2023, the relevant departments of the Federal Reserve still stated that, based on data from various aspects, there is still a need for further rate hikes.

The economic data of the United States not only provides the basis for the Federal Reserve's interest rate hike decisions but also provides a reference for future economic regulation in the United States.

At a monetary policy pre-committee meeting held in September, discussions on raising the benchmark interest rate to 5.25%-5.50% all indicated that the possibility of raising interest rates is small.However, by the November meeting, there began to be some divergence among the committee members regarding the intention to raise interest rates. Some members believed that it was still necessary to raise interest rates once in light of the inflation that is harming people's lives. Others thought that the current interest rate hike policy seemed to have little effect on curbing inflation, so in this case, the Federal Reserve should maintain the current interest rate levels. There were also members who believed that although the current interest rate levels have curbed inflation to some extent, they are not sufficient to reverse the declining manufacturing confidence index, so raising interest rates at this time could lead to a wider recession.

It can be seen that the Federal Reserve's interest rate hike policy is not set in stone, but is adjusted according to the current economic situation in the United States. In the context of the global economy recovering today, there has been skepticism about the Federal Reserve's interest rate hikes. The United States has also deliberated on the decision to raise or lower interest rates in the future. However, Federal Reserve Chairman Powell has indicated that the current recovery and growth rate of the U.S. economy is not balanced, and if the United States continues to maintain its current interest rate levels, it will affect the growth of the U.S. economy. How will the United States continue to raise interest rates to harvest the world? The issue of whether the United States will lower interest rates is of great concern to economists.In previous discussions, it was widely anticipated that the Federal Reserve would lower interest rates within the year 2024. However, the current economic changes make it impossible to make a clear judgment. The United States might opt for a rate cut only when there are changes in the economic situation. But if the United States chooses to lower interest rates, it would have an immeasurable impact on the future global economic situation, as the dollar's "hegemonic" status will directly affect the economic security of various countries.

The Chairman of the Federal Reserve, Jerome Powell, has indicated that there will be certain fluctuations in the future economic situation of the United States, and these fluctuations will affect the benchmark interest rates determined by the Federal Reserve. However, the Federal Reserve will be responsible for its own decisions, and these fluctuations are merely adjustments made in response to the current economic situation.

In predictions about whether the Federal Reserve will lower interest rates, it has been mentioned that the Federal Reserve can restore policy goals of inflation and full employment. However, the financing costs will face greater pressure. Due to the long-term interest rates in the United States already showing a downward trend, this pushes the financing costs in the United States to a higher level. Under such circumstances, American companies will face more severe challenges.

So whether the United States will truly follow its own plan is still uncertain, as the United States' "financial hegemony" status is undeniably present. As a country that can lead the global economic trend, changes in the economic situation of the United States will also lead to fluctuations in the global economy.If the Federal Reserve chooses to lower interest rates, it could lead to a flood of foreign capital into the United States, boosting the value of the dollar and also causing a significant reduction in the foreign exchange reserves of other countries. This would make other countries more economically vulnerable due to the decrease in their foreign exchange reserves.

The United States has been able to become a "financial hegemon" because it holds the monetary standard of the world's major currencies. This allows the United States to reap benefits during global economic fluctuations.

The interest rate decisions made by the United States directly affect the development trends of the global economy, especially for other countries, where both the interest rate hikes and cuts by the United States are factors that need to be considered.

An interest rate hike by the United States could potentially accelerate other countries' search for alternative international settlement methods to replace the dollar. This would have a profound impact on the global economic landscape.

Whether the Federal Reserve will opt for interest rate hikes or cuts has become a question facing the global economy. The future path of the Federal Reserve remains shrouded in uncertainty. It is still unknown whether the Federal Reserve will choose to lower interest rates in the future.Because the global economy still faces significant risks at present.

Although many economic data have returned, there are still many uncertainties.

In the process of the global economic recovery, many countries are standing on the high ground of the United States, ready to share the dividends of economic recovery with the United States.

The Federal Reserve's interest rate hikes undoubtedly have a certain impact on the recovery of the global economy, but they cannot stop the recovery of the world economy.

The United States can recover during economic downturns due to the origin of the world, while other countries cannot recover during economic downturns.

This is a manifestation of the United States' economic hegemony, because the United States' currency has affected the economies of countries around the world.

The year 2024 is a time to re-examine the United States' interest rate policy.

In order to better cope with the changes in the world economy today, the United States may readjust its monetary policy in international arenas.

Interest rate hikes and cuts are just a means of monetary operations, and the real goal is to ensure economic stability.

In the future, as the global economy recovers, other countries will also respond accordingly to the United States' economic policies.Conclusion

While the United States' interest rate hikes are necessary, the underlying economic crisis should not be overlooked.

Future decisions by the Federal Reserve will affect whether we can resolve the economic crisis.

The Federal Reserve's decisions have profound impacts on the global economy, and we will wait and see.