The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets

Research Article
Open access

The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets

Haochen Ni 1*
  • 1 Shanghai Concord Bilingual School    
  • *corresponding author 20171806080@concordschool.com.cn
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/30/20231461
AEMPS Vol.30
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-081-3
ISBN (Online): 978-1-83558-082-0

Abstract

On 23rd March 2023, the Federal Reserve has once again increased its federal funds rate. The policy is published aim for reduce the high inflation rate in the US and prevent once again getting into a recession just like in 2008. This brings both advantages and disadvantages to both the domestic and foreign economies. In this paper, some basic impacts are explained including effects on consumption and investment decisions, stocks and bonds markets, and international relations. As the rise in interest rate increases cost of borrowing and discourages speculation, generally, economic activities are reduced. At the same time, this gives foreign countries heavy pressure by creating outflows of investment funds. Looking forward to the future, it is still possible for the Fed to keep raising its interest rate. To prevent further damages, foreign countries may use expansionary fiscal policy as it can stimulate consumption and investment, and most importantly, bring possibilities of improved economy potential.

Keywords:

federal reserve, interest rate, stock market, bond market, exchange rate

Ni,H. (2023). The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets. Advances in Economics, Management and Political Sciences,30,144-151.
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References

[1]. Board of Governors of the Federal Reserve System. (2012) Federal Reserve issues FOMC statement of longer-run goals and policy strategy. https://www.federalreserve.gov/newsevents/pressreleases/monetary20120125c.htm.

[2]. Waez Asif Sattar. (2022) How Sri Lanka Went Bankrupt. https://oxfordpoliticalreview.com/2022/07/30/how-sri-lanka-went-bankrupt/.

[3]. R. Kozlov. (2023) The effect of Interest Rate Changes on Consumption: An Age-Structured Approach. Economies 2023, 11:23, 1-25.

[4]. Manuel Leon Navarro & Navarro, R. Frutos, (2012) Consumption and housing wealth breakdown of the effect of a rise in interest rate, Applied Economics, 44:16, 2091-2110, DOI: 10.1080/00036846.2011.558484.

[5]. E. Durante, A. Ferrando, P. Vermeulen. (2022) European Economic Review, Monetary policy, investment and firm heterogeneity, 148: 1-45.

[6]. Financial Industry Regulatory Authority. (2022) Brush Up on Bonds: Interest Rate Hike and Duration. https://www/finra.org/investors/insights/bonds-interest-rate-hikes-duration.

[7]. J. Bughin, (1996) Exchange Rates, Pricing-to-Market Strategies, and the Marshall-Lerner Condition, Review of International Economics, 238 Main Street, Cambridge, USA, 211-217.

[8]. W. Zou. (2017) The Trend, Impact, and Countermeasures of the Federal Reserve's Interest Rate Hike, China Academic Journal Electronic Publishing House, 23, 9-13.

[9]. THE PEOPLE’S BANK OF CHINA Monetary Policy Department. (2022). August 22, 2022, the Loan Prime Rate (LPR) announcement by the National Interbank Funding Centre. http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125440/3876551/4637027/index.html .

[10]. European Central Bank. (2022) Monetary Policy Decisions. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220721~53e5bdd317.en.html .

Cite this article

Ni,H. (2023). The Global Effect of Fed Rate Hikes: Stocks, Bonds, and Foreign Exchange Markets. Advances in Economics, Management and Political Sciences,30,144-151.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-081-3(Print) / 978-1-83558-082-0(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.30
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Board of Governors of the Federal Reserve System. (2012) Federal Reserve issues FOMC statement of longer-run goals and policy strategy. https://www.federalreserve.gov/newsevents/pressreleases/monetary20120125c.htm.

[2]. Waez Asif Sattar. (2022) How Sri Lanka Went Bankrupt. https://oxfordpoliticalreview.com/2022/07/30/how-sri-lanka-went-bankrupt/.

[3]. R. Kozlov. (2023) The effect of Interest Rate Changes on Consumption: An Age-Structured Approach. Economies 2023, 11:23, 1-25.

[4]. Manuel Leon Navarro & Navarro, R. Frutos, (2012) Consumption and housing wealth breakdown of the effect of a rise in interest rate, Applied Economics, 44:16, 2091-2110, DOI: 10.1080/00036846.2011.558484.

[5]. E. Durante, A. Ferrando, P. Vermeulen. (2022) European Economic Review, Monetary policy, investment and firm heterogeneity, 148: 1-45.

[6]. Financial Industry Regulatory Authority. (2022) Brush Up on Bonds: Interest Rate Hike and Duration. https://www/finra.org/investors/insights/bonds-interest-rate-hikes-duration.

[7]. J. Bughin, (1996) Exchange Rates, Pricing-to-Market Strategies, and the Marshall-Lerner Condition, Review of International Economics, 238 Main Street, Cambridge, USA, 211-217.

[8]. W. Zou. (2017) The Trend, Impact, and Countermeasures of the Federal Reserve's Interest Rate Hike, China Academic Journal Electronic Publishing House, 23, 9-13.

[9]. THE PEOPLE’S BANK OF CHINA Monetary Policy Department. (2022). August 22, 2022, the Loan Prime Rate (LPR) announcement by the National Interbank Funding Centre. http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125440/3876551/4637027/index.html .

[10]. European Central Bank. (2022) Monetary Policy Decisions. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220721~53e5bdd317.en.html .

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