US Federal Reserve Chairman Jerome Powell is under fire (Getty)
On July 27, the Federal Reserve Board “the US Central Bank” will hold its periodic meeting, to discuss trends in interest rates on the dollar in the coming period and to tighten monetary policy, in light of the runaway inflation that is the highest since 1981, and the continued jumps in fuel and food prices, goods and public services, and weak capacity Citizen purchasing.
If the attention of the whole world was focused on the recent meetings of the US Federal Reserve, which resulted in 3 interest rate increases, the next meeting will be more important, glamorous and influential for several reasons, including the anticipation of world markets for the steps of the monetary policy maker in the United States to address serious issues and major challenges.
Criticism of the Federal Reserve for not dealing efficiently, professionally, and responsibly with the inflation crisis and price jumps
Among those challenges is the recent inflation jump to 9.1% last June, for the first time in 41 years, the increase in fears that the US economy will enter a severe stagflationary phase, and the practical response to the severe attack on the central bank during the last period and its explicit accusation of not dealing efficiently And professional, professional and responsible with the inflation crisis and price jumps.
It is noticeable that the tone of the Federal Reserve’s exposure to strong criticism and talk of the erosion of its credibility, has increased in the recent period due to its wrong expectations regarding inflation and the assertion of its senior officials that it is a temporary matter.
But the rate continued to accelerate in a way that confused the White House administration, which moved quickly to address the crisis, including Joe Biden’s visit last week to the Gulf region, in an attempt to reduce oil prices and with it petroleum products, such as gasoline and diesel.
Among those who attacked the Fed was former US Treasury Secretary Lawrence Summers, who said that central bank officials still made unrealistic expectations, and that “in 2021, the Fed failed us very badly, damaging the credibility of policy. The bank made mistakes in its core business.” .
The former Vice Chairman of the Federal Reserve Board of Supervision, Randall Quarles, also came out to us a few days ago, saying that the central bank should have started raising interest rates before ending its bond purchases, to avoid delays in the face of inflation.
Expectations say that the US Central Bank may implement a more aggressive policy during the coming period to confront the accelerating inflation
In light of these severe pressures on the reserve, expectations say that the US central bank may implement a more aggressive policy during the coming period to confront the accelerating inflation, and that it will raise the interest rate by at least 0.75% at next week’s meeting, and perhaps by 1% according to recent expectations. issued by major investment banks.
In this case, the Federal Reserve puts aside all the concerns that talk about the dangerous effects of raising the interest rate on the American economy, especially on the level of the aggravation of the public debt. The economy is entering a recessionThe markets are in a state of paralysis, the growth rate has declined, the bankruptcy rate has increased, and economic activities are stumbling.
Until the next US Federal Reserve session, it is expected that emerging market currencies will witness declines and possibly sharp fluctuations against the dollar, and we have seen this during the past two days, as we witnessed a decrease in the prices of the Turkish lira, the Syrian lira, the Indian rupee and the Pakistani rupee. And the Egyptian poundas well as the currencies of Afghanistan, South Africa and others, and there are currencies that are close to collapse, especially the currencies of countries that have entered the circle of bankruptcy and infernal financial stumbling, such as Lebanon and Sri Lanka or close to it.
The currencies of Turkey, Egypt, Lebanon, Syria, India and Pakistan are under severe pressure due to the flight of hot money
It is also expected that this decline will continue with the exodus and flight of more hot money from the emerging markets towards the American markets, to invest in bonds, debt instruments and deposits, which have become more attractive for investment with their distinctive return and low risks.
India, for example, is among those countries, where foreign investors withdrew 30.8 billion dollars from its markets this year in the form of hot money that was invested in bonds and stocks, and investors withdrew 20 billion dollars from Egypt, and the scene was repeated in other countries from which 4 billion dollars fled in a month last June.
The coming days are fraught with surprises, especially if the policies of the US Federal Reserve become more aggressive and its decisions more stringent, and the European Central Bank, which has recently moved, joins it. To stop the devaluation of the euro Which fell to its lowest level in 20 years.