The U.S. Federal Reserve (Fed) raised interest rates by 25 basis points to between 5 percent and 5.25 percent on May 3rd, which is the tenth increase since March last year. According to a series of polls conducted by CGTN, 73 percent of the surveyed economists believe that the Fed's continuous rate hikes will worsen the global economic recession, and 88 percent believe that the U.S. has become the biggest threat to global financial stability.
The problem caused by quantitative easing
Why is the U.S. obsessed with raising interest rates? For most of last year, the Fed considered inflationary pressure to be "temporary," but only 15 percent of economists in the survey agreed with the Fed's judgement on inflation before raising interest rates. Instead, 57 percent of economists believed that the frequent implementation of quantitative easing and excessive money printing are the main reasons for inflation. Half of the economists also pointed to the trade conflict the U.S. started with China as a key factor.
The latest data from the U.S. Labor department showed the consumer price index rose 5 percent in March from a year earlier, well above the Fed's 2 percent target. Fed Chairman Jerome Powell also said the Fed bank is still likely to raise interest rates in the future. "The high inflation will be the major obstacle for the U.S. economy in the next one to two years," according to 72 percent of surveyed economists.
Aggressive rate hikes hit the U.S. banks
The U.S. banking crisis continues to escalate, with the sale of First Republic Bank of America to JPMorgan Chase earlier this month, which is the third bank to fail recently after Silicon Valley Bank and Signature Bank.
The survey showed that more than 86.8 percent of global respondents believed it was the Fed's aggressive policy of raising interest rates that exacerbated the crisis in the U.S. banking. However, Fed Chairman Jerome Powell did not link the banking crisis to aggressive rate hikes, adding that the acquisition of failing banks is a good outcome for the banking system. In the survey, 94.3 percent of global respondents believe that the continuous bank failures reveal serious loopholes in the U.S. financial system, which cannot be effectively addressed in the short term. The crisis of the U.S. banking industry has made 92.6 percent of the global respondents further deepen their distrust of the U.S. financial institutions, and the panic also continues to spread.
Aggressive rate hikes exacerbate the global recession
Meanwhile, the Fed's continued rate hikes, fast-paced and large-scale, have created negative effects outside the U.S. Influenced by the Fed's frequent interest rate hikes, many central banks follow up with interest rate hikes in order to contain inflation and stabilize local currency exchange rates, and the spillover effect of the Fed's interest rate hikes is increasingly obvious.
According to the global economists, the top three negative impacts of the Fed's aggressive interest rate hike on the global economy are the damage to global market and investor confidence (82 percent), the decrease on commodity trading and import and export trade (76 percent), and the destabilization of global industrial and supply chains (73 percent). In addition, 94 percent agreed that developing economies are at risk of soaring debt crises due to the Fed's moves. 83 percent of respondents stated that social stability might be affected in developing countries.
The World Bank concerned that a worldwide "wave of interest rate rises" would push the global economy into recession. According to the poll, 73 percent of the economists surveyed agreed this statement. Moreover, 67 percent called on the U.S. to give more consideration to spillover effects to avoid causing more damage to the already fragile global economy, especially developing countries, when they make policies. They should earnestly fulfill their due obligations to maintain global financial stability and promote world economic recovery.
The above survey data came from two global polls conducted by CGTN, with 100 economists and more than 40,000 netizens participating in the survey and expressing their views.