According to CCTV News reports on July 6, local time7 On May 5, the Federal Reserve released the minutes of its June meeting. Meeting minutes show that almost all Fed officials said at the June meeting that they may further tighten policy, but at a slower pace than2022Monetary policy has been rapidly raising interest rates since the beginning of the year.
The relationship between interest rate hikes and the textile market
The Federal Reserve’s interest rate hike is obviously an economic act, but it has been lingering in the ears of textile people in the past two years.
After all, interest determines a company’s operating costs to a large extent. When interest rates are high, companies will naturally be able to borrow less money, and they will be less willing to expand markets. This is especially true for the public. When interest rates are high, people are naturally willing to deposit money in banks, and the consumption of textiles such as clothing will naturally decline.
But it won’t work if we don’t raise interest rates. Too much money has been printed in the past few years. If we don’t raise interest rates to get it back, prices will skyrocket, people’s living standards will plummet, and future elections will be difficult.
It doesn’t matter if the United States alone raises interest rates. As the U.S. dollar is the most liquid currency, if the Federal Reserve raises interest rates and other currencies do not, then all the money will flow to the United States. There is no other way. In the end, everyone can only raise interest rates together, and then everyone’s consumption shrinks together. (Ps: Japan is in a special situation. The amount of Japanese debt is too large and the finance may collapse if interest rates are raised.)
The impact of RMB exchange rate
One issue that textile people are more concerned about in the past two years is the exchange rate. There is nothing we can do about it. After all, the exchange rate fluctuated by 0.1 in the past, even if it was not small, 2022 The annual RMB exchange rate was once6.7, and then it became 7.3. The fluctuation range exceeded 10%, which is much higher than the profit.
Of course, the reasons for the depreciation of the RMB are more complicated, but the interest rate differential is definitely a very important factor. The Federal Reserve will continue to raise interest rates in the future, but China is cutting interest rates, and the exchange rate must not fall.
Of course, the exchange rate cannot keep falling. A small drop in the exchange rate can promote exports, but a large drop in the exchange rate will make the currency lose credibility.
Fortunately, the central bank still has many countermeasures to raise the exchange rate, and China’s economic fundamentals are considered good worldwide. There is no basis for long-term depreciation of the RMB. Last week, the exchange rate was close to 7.3 , the result has recently returned to 7.2. The RMB is more likely to fluctuate in a range in the future, and unilateral trends are unlikely.
time
According to Federal Reserve officials, U.S. dollar interest rates will remain high in 2023 and will slowly begin to fall in 2024 . Looking at it this way, it may take 2025 for the Fed’s interest rates to return to a more normal level.
In other words, before 2024 is over, global household consumption may still be dominated by contraction, and it is difficult for the overall consumption level to see a substantial recovery.
During this period, the market will accumulate a large amount of inventory, which will take time to digest. Therefore, the recovery of the textile market may be slightly later than the recovery of consumption data, and may have to wait until 2025 Year.
Of course, this period of time cannot be wasted. The current market situation is like sailing against the current. If you don’t advance, you will retreat. In the words of Boss Bu, it is very complicated.
With few orders and low profits, it is really difficult for textile companies to survive if they have no skills. However, those companies that can really survive until the market recovers are almost all “roll kings” and their market competitiveness is not generally strong. This is when textile companies can really take off.
And the premise of everything is to survive until that time.
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