Ten predictions for China's economy in 2015
Updated: 2014-11-05 14:34
Federal Reserve Chair Janet Yellen's first news conference appears on a television monitor on the floor of the New York Stock Exchange. [File photo]
2. The Federal Reserve will raise interest rates to enable the U.S. dollar to appreciate while the third wave of the global financial crisis will enter a climax.
The U.S. Federal Reserve will start raising interest rates in 2015. But the precise timing may not be as early as some market observers predict. It probably will happen in the middle of the year. Since the current inflation expectation is stable and financial risks are not yet worrying, the Federal Reserve doesn't want to quit early and if it quits early, this will make a stronger U.S. dollar which will not benefit American interests. But no matter what, the period of rising interest rates will come sooner or later. As they raise the interest rates, the U.S. economy will speed up the recovery process, which will increase the international capital floating back into the countries led by the United States. The global capital market will reshuffle again: The U.S. dollar will continue the big appreciation period since 2008 and commodities will weaken while venture assets will be revalued again.
The key reasons are: first, after the financial crisis, the developed countries such as the United States want to rebalance, the core of which is deleveraging and raising the savings ratio. The result will be that the new markets' surplus against developed markets will largely be narrowed and the function which the external trade will use to pull the economy up will be weakened. Second, the United States relied on systems and technologies to revive the economy domestically at first after the crisis and the economic prospects are relatively optimistic.
On the other side, emerging market countries will lose the engine of external demand and be haunted by aging populations and resource shortages. So the economic growth prospects are very worrying. It will increase the gap between the U.S. dollar and the currencies of new markets.
The 2008financial crisis has not ended yet, and we predict the Federal Reserve's interest rates raise will send the third wave of the crisis into a climax.