The Economic Consequence of Fed’s Monetary Policies in 2022: An Internal Perspectives

Research Article
Open access

The Economic Consequence of Fed’s Monetary Policies in 2022: An Internal Perspectives

Xiangyu Fan 1*
  • 1 York University    
  • *corresponding author khaoula0@my.yorku.ca
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/42/20232108
AEMPS Vol.42
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-105-6
ISBN (Online): 978-1-83558-106-3

Abstract

US interest rate hikes due to COVID-19 and high inflation have affected the country's stock market and the international foreign exchange market. The authors analyze the willingness of U.S. interest rate hikes to cause inflation at the micro level through changes in the amount of money held by residents because of U.S. policies. This paper analyzes the impact of the U.S. interest rate hike by collecting various information on rental housing, GDP and spot exchange rates of countries affected by the U.S. According to the findings of this paper: 1. US interest rate hikes lead to a rise in the amount of currency held by citizens. 2. Interest rate hikes affect the GDP growth rate, and the stock market are positively correlated. 3. US monetary policy affects the world economy. The point of studying the Fed's rate hikes is to analyze the strengths and weaknesses of the policy and to find better ways to control inflation and make the economy stable. According to this paper, the authors propose that the United States should stop raising interest rates at the right time when the inflation rate falls to the right value and let interest rates return to their previous levels, otherwise it will stagnate the country's economic development and cause turmoil in the country's stock and foreign exchange markets.

Keywords:

inflation, COVID-19, hike rate, financial market, foreign exchange market

Fan,X. (2023). The Economic Consequence of Fed’s Monetary Policies in 2022: An Internal Perspectives. Advances in Economics, Management and Political Sciences,42,192-201.
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References

[1]. Federal Reserve. (2023). FOMC’s target federal funds rate or range, change (basis points) and level. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/monetarypolicy/openmarket.htm

[2]. Bureau, U. C. (2023). Household Pulse Survey Data Tables. Census.gov. https://www.census.gov/programs-surveys/household-pulse-survey/data.html#phase3

[3]. U.S. Department of the Treasury. (2023). Emergency Rental Assistance Program | U.S. Department of the Treasury. Home.treasury.gov. https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program

[4]. Center on Budget and Policy Priorities. (2021). Tracking the COVID-19 economy’s effects on food, housing, and employment hardships. Center on Budget and Policy Priorities; Center on Budget and Policy Priorities. https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-economys-effects-on-food-housing-and

[5]. U.S. Bureau of Labor Statistics. (n.d.). Bureau of Labor Statistics Data. Bls.gov. Retrieved June 27, 2023, from https://data.bls.gov/timeseries/lns14000000

[6]. Congress Of Government. (2020). H.R.748 - 116th Congress (2019-2020): CARES Act.

[7]. Helper, S., & Soltas, E. (2021). Why the Pandemic Has Disrupted Supply Chains. Council of Economic Advisers.

[8]. U.S. Bureau Of Labor Statistics. (2021). Consumer Price Index News Release. CONSUMER PRICE INDEX – DECEMBER 2020.

[9]. INTEREST RATES RISE AGAIN. Toronto: Canadian Broadcasting Corporation, 2022.

[10]. Holzhauer, B. (2022). Pros and cons of Fed raising interest rates in today’s economic conditions—and how you can benefit. CNBC. https://www.cnbc.com/select/interest-rate-hike-pros-cons-how-to-benefit/

[11]. Macrotrends. (2020). U.S. GDP Growth Rate 1961-2020. Macrotrends.net. https://www.macrotrends.net/countries/USA/united-states/gdp-growth-rate

[12]. Macrotrends. (2023). S&P 500 Historical Annual Returns. Macrotrends.net. https://www.macrotrends.net/2526/sp-500-historical-annual-returns

[13]. Huston, S. J. (2012). Financial literacy and the cost of borrowing. International Journal of consumer studies, 36(5), 566-572.

[14]. Markowicz, S. (2022). Why is there a negative correlation between equities and bonds? https://www.schroders.com/en-us/us/individual/insights/what-drives-the-equity-bond-correlation/

[15]. Sukadana, I. W., Wiagustini, N. L. P., Wardana, I. M., & Purbawangsa, I. B. A. (2017). Role of Risk Appetite Mediating the Effect of Interest Rate Risk and Credit Risk to Profitability. European Journal of Business and Management, 9(12), 120-132.

[16]. Bordo, M. D. (2020). The imbalances of the bretton woods system 1965 to 1973: US Inflation, the Elephant in the Room. Open economies review, 31, 195-211.

[17]. Bown, C. P., & Kolb, M. (2022). Trump’s trade war timeline: An up-to-date guide.

[18]. China Foreign Exchange Rate System. (n.d.). CNY Central Parity Rate - CFETS. Iftp.chinamoney.com.cn. Retrieved June 29, 2023, from https://iftp.chinamoney.com.cn/english/bmkcpr/index.html?tab=2.

[19]. Yahoo Finance. (n.d.). CBOE Interest Rate 10 Year T No (^TNX) Charts, Data & News - Yahoo Finance. Finance.yahoo.com. Retrieved June 29, 2023, from https://finance.yahoo.com/quote/%5ETNX?p=%5ETNX

[20]. Wu, Y. (2022). Analyzing Interest Rate Hikes in the US and Eurozone, RMB Depreciation. China Briefing News. https://www.china-briefing.com/news/interest-rate-hikes-in-the-us-and-eurozone-rmb-depreciation-and-the-implications/

[21]. Pettis, M. (2022). Will the Chinese renminbi replace the US dollar?. Review of Keynesian Economics, 10(4), 499-512.

Cite this article

Fan,X. (2023). The Economic Consequence of Fed’s Monetary Policies in 2022: An Internal Perspectives. Advances in Economics, Management and Political Sciences,42,192-201.

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About volume

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

ISBN：978-1-83558-105-6(Print) / 978-1-83558-106-3(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.42
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Federal Reserve. (2023). FOMC’s target federal funds rate or range, change (basis points) and level. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/monetarypolicy/openmarket.htm

[2]. Bureau, U. C. (2023). Household Pulse Survey Data Tables. Census.gov. https://www.census.gov/programs-surveys/household-pulse-survey/data.html#phase3

[3]. U.S. Department of the Treasury. (2023). Emergency Rental Assistance Program | U.S. Department of the Treasury. Home.treasury.gov. https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-program

[4]. Center on Budget and Policy Priorities. (2021). Tracking the COVID-19 economy’s effects on food, housing, and employment hardships. Center on Budget and Policy Priorities; Center on Budget and Policy Priorities. https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-economys-effects-on-food-housing-and

[5]. U.S. Bureau of Labor Statistics. (n.d.). Bureau of Labor Statistics Data. Bls.gov. Retrieved June 27, 2023, from https://data.bls.gov/timeseries/lns14000000

[6]. Congress Of Government. (2020). H.R.748 - 116th Congress (2019-2020): CARES Act.

[7]. Helper, S., & Soltas, E. (2021). Why the Pandemic Has Disrupted Supply Chains. Council of Economic Advisers.

[8]. U.S. Bureau Of Labor Statistics. (2021). Consumer Price Index News Release. CONSUMER PRICE INDEX – DECEMBER 2020.

[9]. INTEREST RATES RISE AGAIN. Toronto: Canadian Broadcasting Corporation, 2022.

[10]. Holzhauer, B. (2022). Pros and cons of Fed raising interest rates in today’s economic conditions—and how you can benefit. CNBC. https://www.cnbc.com/select/interest-rate-hike-pros-cons-how-to-benefit/

[11]. Macrotrends. (2020). U.S. GDP Growth Rate 1961-2020. Macrotrends.net. https://www.macrotrends.net/countries/USA/united-states/gdp-growth-rate

[12]. Macrotrends. (2023). S&P 500 Historical Annual Returns. Macrotrends.net. https://www.macrotrends.net/2526/sp-500-historical-annual-returns

[13]. Huston, S. J. (2012). Financial literacy and the cost of borrowing. International Journal of consumer studies, 36(5), 566-572.

[14]. Markowicz, S. (2022). Why is there a negative correlation between equities and bonds? https://www.schroders.com/en-us/us/individual/insights/what-drives-the-equity-bond-correlation/

[15]. Sukadana, I. W., Wiagustini, N. L. P., Wardana, I. M., & Purbawangsa, I. B. A. (2017). Role of Risk Appetite Mediating the Effect of Interest Rate Risk and Credit Risk to Profitability. European Journal of Business and Management, 9(12), 120-132.

[16]. Bordo, M. D. (2020). The imbalances of the bretton woods system 1965 to 1973: US Inflation, the Elephant in the Room. Open economies review, 31, 195-211.

[17]. Bown, C. P., & Kolb, M. (2022). Trump’s trade war timeline: An up-to-date guide.

[18]. China Foreign Exchange Rate System. (n.d.). CNY Central Parity Rate - CFETS. Iftp.chinamoney.com.cn. Retrieved June 29, 2023, from https://iftp.chinamoney.com.cn/english/bmkcpr/index.html?tab=2.

[19]. Yahoo Finance. (n.d.). CBOE Interest Rate 10 Year T No (^TNX) Charts, Data & News - Yahoo Finance. Finance.yahoo.com. Retrieved June 29, 2023, from https://finance.yahoo.com/quote/%5ETNX?p=%5ETNX

[20]. Wu, Y. (2022). Analyzing Interest Rate Hikes in the US and Eurozone, RMB Depreciation. China Briefing News. https://www.china-briefing.com/news/interest-rate-hikes-in-the-us-and-eurozone-rmb-depreciation-and-the-implications/

[21]. Pettis, M. (2022). Will the Chinese renminbi replace the US dollar?. Review of Keynesian Economics, 10(4), 499-512.

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