Today, I would like to discuss with you a topic that plays a crucial role in today's world economy—the Federal Reserve's monetary policy and its impact on the global economy.
As the central bank of the United States, the Federal Reserve's monetary policy not only profoundly affects various aspects of the U.S. economy but also has far-reaching spillover effects globally. Looking back over the past few years, the Federal Reserve's monetary policy has gone through a process of tightening to easing and now seeking balance, which undoubtedly brings many challenges and opportunities for global economic development.
In 2022, facing a severe inflation situation, the Federal Reserve adopted an aggressive interest rate hike strategy, raising rates a total of seven times throughout the year, with the federal funds rate target range increased to 4.25%-4.5%. Although this measure somewhat curbed the rapid rise of inflation, it also led to severe fluctuations in global financial markets, especially with emerging market countries generally facing pressures of capital outflows and currency depreciation. However, entering 2023, as inflation gradually comes under control, the Federal Reserve began to adjust its strategy, announcing a 50 basis point rate cut in September, the first cut since March 2020, aimed at alleviating financial market pressures and supporting economic growth.
The adjustments in the Federal Reserve's monetary policy not only directly affect the economic recovery and financial market stability of the United States but also play an important role in global economic governance and the stability of the international financial system. Its loose monetary policy often leads to global liquidity excess, causing asset bubbles and currency depreciation risks; while a tight monetary policy may trigger capital flow back to the U.S., leading to capital shortages and currency crises in other countries, especially developing countries. Therefore, the direction of the Federal Reserve's monetary policy has always been the focus of global financial markets.
In summary, the Federal Reserve's monetary policy is a double-edged sword, which has the potential to drive global economic prosperity and development but may also bring risks and challenges. We need to respond to the changes in the Federal Reserve's monetary policy with a more open and inclusive mindset, strengthen international cooperation and coordination, and jointly maintain the stability and prosperity of the global financial markets.