Dynamic Changes in US Financial Market under Fed's Rate Hike: Past, Present and Prospect

Abstract

In March 2022, the Federal Reserve began a new round of interest rate hike. Until February 2023, Jerome Hayden Powell, the incumbent chairman of Fed, still indicated that the continuation of the interest rate hike policy is still appropriate. Many significant changes have occurred in the financial markets over the past year, however, limited information is currently available to analyze the impact of the new round of Fed rate hike policy. This paper analyzes data of the U.S. dollar index, the Nasdaq 100 index and multiple secondary sources, applies economic principles such as the J-curve effect, cites examples from Japan, Sri Lanka and China, and finds that the U.S. financial market is in an overall sustained tightening state under the interest rate hike policy, and the international financial market will have to cope with more debt and trade challenges. This papers analysis is of great reference value to the investment decisions of the government, banks, enterprises and individuals.