The U.S. Federal Reserve announced a quarter-point hike in interest rates and is expected to begin shrinking its balance sheet as soon as May. Standard Chartered Hong Kong estimates that although the Fed's dot plot is expected to raise interest rates 7 times this year, the bank expects that as inflation has a chance to peak and decline in the second half of the year, the Fed's enthusiasm for raising interest rates in the second half of the year may not be as expected, and it is estimated that it may be possible throughout the year. The number of rate hikes is only 4 times. As the number of interest rate hikes is less than market expectations, the chances of the HKD going to the weak-side convertibility guarantee level of 7.85 are low.
Zeng Jizhi, head of financial markets in Hong Kong and the Greater Bay Area at Standard Chartered, said that from the market reaction, if the Fed's interest rate discussion is popular, it will give the market confidence and stability.
Standard Chartered Greater China Senior Economist Liu Jian Hang Seng Index, the interest rate results in line with expectations, also shows that the Fed is determined to control inflation, the statement reassured the market, pointing out that the recent economic performance is strong, able to cope with rising interest rates.
Liu Jianheng pointed out that Standard Chartered Hong Kong estimates that the Federal Reserve may not raise interest rates 7 times as expected by the market this year, and may only raise interest rates 4 times, but it is possible to raise interest rates by 50 basis points each time in one or two interest rate meetings in the future. He mentioned that there is still room for US inflation to rise. The US labor market is tight and wages are expected to rise. However, as the Federal Reserve continues to raise interest rates, inflation may peak and decline in the middle of the year. At that time, the Federal Reserve may reduce the number of interest rate hikes in response to inflation. . As for the process of shrinking the balance sheet, Liu Jianheng expects that the process will be annual, and the scale may be smaller than expected.
When will the Hong Kong interest rate follow the US interest rate increase? Liu Jianheng pointed out that in the last interest rate hike cycle, the Hong Kong interest rate and the US interest rate will gradually widen over time, from 20 to 30 pips at the beginning, and then widened to 40 to 50 pips Ideas, time in years. Liu Jianheng said that according to "conventional wisdom", when the Hong Kong-US interest rate spread widens to more than 50 basis points, it is necessary to pay attention to whether there is an increase in arbitrage activities, and also pay attention to the balance of the banking system. Follow US rate hikes.
Regarding the Hong Kong exchange rate expectations, Liu Jianheng believes that the Hong Kong dollar interest rate has gradually increased recently, and is expected to maintain the level of 7.8. Unless the trend of the Hong Kong stock market becomes weaker and the Hong Kong-US interest rate spread rapidly widens by 70 to 80 pips, there is little chance that the Hong Kong exchange rate will hit a low of 7.85 during the year.
When asked about the mainland's monetary policy, Liu Jianheng predicted that the People's Bank of China will have the opportunity to "cut the reserve requirement ratio" by 0.5 percentage points within the month, and may cut the medium-term lending facility (MLF) interest rate in the second quarter.