Over the past four decades, the U.S. Federal Reserve System (Fed) has experienced seven rounds of interest rate hikes. The start and end times of these cycles and the magnitude of interest rate adjustments vary, but all reflect the evolution of the global economic situation and the U.S. domestic economy. Below we will review the background and related influencing factors of these seven rounds of interest rate hikes one by one.
The first cycle began in March 1983 and ended in August 1984, during which the benchmark interest rate was raised from 8.5% to 11.5%. During this period, the US economy was in the early stages of recovery, and the Reagan administration implemented a series of economic reform policies, such as tax cuts, government reduction, and defense spending reduction, to stimulate economic growth. In addition, the high inflation rate from 1981 to 1983 also prompted the Federal Reserve to raise interest rates to reduce inflationary pressure.
The price was the outbreak of the Latin American debt crisis (Mexico, Brazil, Argentina and dozens of other countries were forced to give up part of their monetary sovereignty.
The second cycle occurred from March 1988 to May 1989, during which the benchmark interest rate was raised from 6.5% to 9.8125%. Although the US economy showed a growth trend during this period, it still faced a certain degree of inflation. Therefore, the Federal Reserve raised the benchmark interest rate from 6.5% to 7.5% in 1988 to prevent further inflation. However, as the impact of the global stock market crash in 1987 gradually weakened, the Federal Reserve raised the benchmark interest rate to 9.8125% in May 1989 to support continued economic growth.
In response to the US stock market crash, the interest rate was raised by 9.8125%, at the cost of Japan's lost 30 years
The third cycle began in February 1994 and ended in February 1995, during which the benchmark interest rate was raised from 3.25% to 6%. During this period, the US economic growth rate slowed down and the inflation rate also declined. Despite this, the Federal Reserve still decided to raise interest rates to curb inflationary pressure. In February 1995, the Federal Reserve raised the benchmark interest rate to 6% to maintain stable economic development.
In order to combat the overinvestment in the Internet bubble, the third round of interest rate hikes triggered the Asian financial crisis, draining Thailand, South Korea, Indonesia and other countries.
The fourth round of interest rate hikes began in June 1999 and ended in May 2000, during which the benchmark interest rate was raised from 4.75% to 6.5%. During this period, the US economic growth rate accelerated, while the inflation rate continued to rise. In order to solve this problem, the Federal Reserve began to tighten monetary policy in June 1999 and started a cycle of interest rate hikes. After 11 months and 6 cumulative interest rate hikes, the Federal Reserve raised the benchmark interest rate to 6.5%.
Wake up European countries and let Europe recognize who is the world's boss
The fifth round of interest rate hikes began in June 2004 and ended in July 2006, during which the benchmark interest rate was raised from 1% to 5.25%. During this period, the US economy grew rapidly and the real estate market also showed a boom. However, with rising house prices and intensified investor speculation in the real estate market, inflationary pressure also rose. For this reason, the Federal Reserve began to tighten monetary policy in June 2004 and started a cycle of interest rate hikes. After 17 cumulative interest rate hikes of 25 basis points, the Federal Reserve raised the benchmark interest rate to 5.25%.
It suppressed speculation in the real estate market. At the same time, the interest rate cut in 2008 directly triggered the collapse of Lehman Brothers Bank, leading to the global economic crisis.
The sixth round of interest rate hikes began in December 2015 and ended in December 2018, during which the benchmark interest rate was raised from 0 to 2.25%. During this period, the United States officially launched the process of monetary policy normalization and the interest rate hike cycle against the backdrop of a long-term zero interest rate policy and large-scale quantitative easing policy. It lasted 36 months and 9 interest rate hikes, and the Federal Reserve raised the benchmark interest rate to 2.25%.
Little impact
As of March 2022 to July 2023, the interest rate has been raised 11 times in a row, with a total increase of 525 basis points. The interest rate has reached 5.5%. The Federal Reserve is experiencing a new round of interest rate hikes to raise interest rates in response to the economic difficulties caused by the new coronavirus pandemic.
At 2 a.m. on the 19th, the Federal Reserve will announce its latest interest rate.
What kind of follow-up impact will this bring? Let's wait and see