The world market is drawing attention!Interest rate cuts from Powell

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The global market is suffering from the effects of the Russian-Ukraine war, but the Fed continues to implement its programs with determination. The Fed has begun raising interest rates to stop the rise in inflation that has shaken the US economy. The Fed, which raised interest rates by 25 basis points last week, is preparing to take new steps.

To combat the world-wide inflation problem, central banks have begun to use interest rate-raising weapons one by one. With the Fed’s 25 basis point rate hike, many developing and developed countries have raised interest rates without delay.

High demand, low supply, rising prices

Due to the decrease in production due to the coronavirus pandemic and the decrease in the impact of the pandemic, the price increased due to the increase in demand and the decrease in supply. In particular, the lack of production of chips used in electronic devices has caused a global crisis. Many sectors, such as the automotive and industrial sectors, especially the electronics sector, have been severely damaged by the chip crisis. While the car factory was temporarily closed, supply constraints raised prices.

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Rising energy prices after the pandemic were one of the main factors affecting inflation. In addition, the money many countries have given to their people to alleviate the pandemic has also increased inflation.

Again, the human mobility that occurred after the pandemic also caused a sudden change. With the opening of borders, the revival of tourism, the relaxation of measures, and the end of mask use in some countries, prices in the tourism sector have begun to rise excessively.

Russia-Ukraine war is also effective

The fact that the war between Russia and Ukraine did not cool, negotiations between the two countries had no consequences, and Russia’s continued attacks caused problems on a global scale. Energy prices also rose when the decision was made not to buy oil from Russia, one of the world’s largest oil producers. Moreover, the fact that both Russia and Ukraine are the world’s breadbaskets, and the expectation that access to these products will be restricted is causing food prices to rise. Apart from this, problems began to occur in the steel field. Due to factors such as energy constraints and difficulty in accessing food, prices are likely to peak in a short period of time around the world.

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POWELL can raise interest faster

Federal Reserve Chair Jerome Powell has announced that the Federal Reserve is ready to accelerate rate hikes if high inflation continues.

Powell said policymakers would like to raise interest rates sooner if inflation does not fall despite a rate hike, with inflation peaking in the first quarter of this year and expected to fall in the second quarter. He said he was. Powell added that if inflation is far from policymakers’ expectations, more swift action is needed in raising interest rates, which can be done and interest rates can be raised by 50 basis points. “If we think it’s appropriate to raise 50 basis points in one or more meetings, we’ll do that,” Powell said.

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Powell said in a previous statement that the rise in inflation was temporary, but he will take swift action as the business remains serious.

What if the Fed rises?

The Fed’s main reason for raising interest rates is to prevent inflation. By raising interest rates, the Fed seeks to reduce market over-demand and lure people into investment. Believing that those who want to make money from interest can change the direction of investment and savings, the Fed wants to balance the supply and demand of the market, ensure price stability and curb inflation. If the supply and demand balance is achieved, the demand on the production input side will decrease, the price will decrease, and the manufacturing side will also have merits, and we aim to be able to produce at low cost. In particular, the cost of rising energy prices is the main reason for the price rise. Energy is used in both production and logistics, so prices rise before a product is produced. In addition, the decline in the circulation of dollars in the market by natural persons and corporations who earn interest on banks creates a move to increase their value. The dollar’s purchasing power, which is declining in the market, has increased and is playing an important role in controlling inflation.

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