Just as investors increasingly believed that the Federal Reserve would raise interest rates in September, a subtle change occurred.
On the 11th, the People's Bank of China announced its decision to improve the quotation of the Renminbi to U.S. dollar exchange rate midpoint, resulting in a nearly 4% continuous depreciation of the Renminbi against the U.S. dollar.
In light of the new changes in the foreign exchange market, analysts have raised doubts about the Federal Reserve's ability to raise interest rates next month. Analysts believe that the depreciation of the Renminbi may reduce the appeal of products from brands such as Apple and Coach to Chinese consumers, thereby decreasing the demand for commodities such as iron ore and copper.
Analysts also predict that if the stock market continues to decline, Federal Reserve officials may delay the interest rate hike until after September. U.S. media on the 12th quoted Diana Swonk, chief economic analyst at Mesirow Financial, stating that if the stock market remains volatile, the Federal Reserve's interest rate hike will exacerbate the turmoil.
Swonk believes that the Federal Reserve may delay the interest rate hike because it "cannot afford to let the stock market fluctuate too much."
In fact, Wall Street insiders are already pessimistic about the Federal Reserve raising interest rates in September. The latest survey results from the Chicago Mercantile Exchange show that investors believe the likelihood of the Federal Reserve raising interest rates in September is 39%, significantly lower than last week's prediction of 56%.
【The U.S. Dollar is Also Depreciating】
In fact, the U.S. dollar exchange rate is declining. The U.S. dollar fell 1% against a basket of currencies on the 12th.
Michael Block, chief market strategist at Rhino Trading Partners, stated that as the market's expectations for the Federal Reserve's imminent interest rate hike gradually shift, expectations for the appreciation of the U.S. dollar are collapsing.
However, not all analysts believe that the Federal Reserve will delay the interest rate hike. Brett Ryan, an economic analyst at Deutsche Bank, stated that the depreciation of the Renminbi will not have a substantial impact on U.S. economic growth or employment, "If China takes measures to stabilize its economy, it will actually benefit the global economy."
Media commentary suggests that the depreciation of the Renminbi is just one of the headaches the Federal Reserve needs to face. Regardless of whether it is due to China, Greece, or other factors, the Federal Reserve always finds reasons to delay interest rate hikes. However, the Federal Reserve ultimately still needs to raise interest rates; otherwise, how can it have the "interest rate cut" tool to respond to the next financial crisis?