Good guys, the Fed’s interest rate hike in 2022 is finally over! On December 15, the Federal Reserve issued its last interest rate decision of the year – a 50 basis point interest rate hike. After this rate increase, the Federal Reserve has raised interest rates by 4.25% cumulatively this round.
In the Western world under the “US dollar system”, less than 24 hours after the Federal Reserve announces its interest rate decision, the European Central Bank, the Bank of England, the Swiss National Bank, the Norwegian Bank, the Philippine Bank, the Bank of Mexico, etc. will also announce the last interest rate decision of the year. . And industry insiders generally expect that such bank interest rate increases will also reach 50 basis points.
What impact will the Fed’s interest rate hike have on textile people?
Raw material prices fall
After the Federal Reserve raised interest rates, the most direct impact was that the three major U.S. stock indexes all turned lower from short-term intraday losses. As of the close on December 15, the Dow Jones Index fell 142.95 points, or 0.42%; the Nasdaq Composite Index closed down 85.93 points, or 0.76%; the S&P 500 Index closed down 24.65 points, or 0.61%.
In addition to the stock market, every time the Federal Reserve raises interest rates, it will cause a huge shock to the energy industry. Every time it raises interest rates, it will cause crude oil to plummet, which will also drive the downstream market to fall. This week, the Federal Reserve raised interest rates again, and the replenishment of weaving companies has been completed. Polyester production and sales have returned to flatness again. The current atmosphere of rising polyester raw material prices may be poured cold water on, and there is a possibility of “diving” again.
Global exchange rate fluctuations
The most important thing is that the Federal Reserve’s interest rate hikes have troubled the world for a whole year. The interest rate on U.S. dollar deposits now far exceeds that of almost all countries in the world. After four interest rate hikes this year, the interest rate has rushed all the way from 0% to the current rate. 4.5%, what is this concept? This means that no matter where your capital is in the world, as long as you deposit your money there, you can earn 4.5% in a year. If you want to compare domestically, the current real-time interest rate for one-year deposits of a certain bank is 2.15%, so you can imagine how attractive this is to capital from around the world.
And the chain reaction caused by this is exchange rate fluctuations. For textile companies engaged in foreign trade, exchange rate fluctuations are also a problem that requires great attention. Due to the large amount of capital flowing back to the United States, the exchange rates of major international currencies such as the Japanese yen, the euro, and the British pound have all fallen this year. Although the RMB depreciated sharply before, the RMB exchange rate has returned to around 6.9 since December. The exchange rates of other currencies have depreciated, but the RMB has remained strong. This means that the price of exported textiles has become more expensive, which is definitely not good news for foreign trade companies.
Fed’s “pace of raising interest rates” slows
But it is worth noting that the interest rate base point of this interest rate hike is very interesting, the interest rate increase is 50 basis points! You must know that this is the first time the Federal Reserve has slowed down its interest rate hikes after four consecutive 75 basis point hikes. From this point of view, the finale of the Federal Reserve’s interest rate hike in 2022 can be regarded as a relatively good signal for foreign traders – the Federal Reserve has released a signal that the pace of interest rate hikes will “slow down.”
This means that the problems just mentioned above will be alleviated by 2023, and everyone knows the current situation. Control is loosened, and foreign trade people go overseas to “grab orders” in groups. This all thinks that this economic trend has begun. Way to go.
Therefore, regardless of various factors at home and abroad, it means that 2023 will be a turning point for the textile market and even the national economic market. It can be seen that it is particularly important to prepare for next year in the last month of this year.
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