Simply put: reduce bubbles and inflation. First of all, the United States raised interest rates to curb high inflation in the country. Moreover, the purpose of raising interest rates is to forcibly recover the money circulating in the market through the intervention of tightening monetary policy . At the same time, it will also increase the interest rate of loans from here , which will inhibit the liquidity of the dollar in the future and bring the funds back. Through the return of funds, the speed of economic development can be slowed down and inflation can be reduced. Coupled with the dominance of the US dollar, every interest rate hike by the Federal Reserve has a synchronous impact on the global economy.
Secondly, it is accompanied by domestic inflation in the United States, and the global inflation crisis brought about by the dollar liquidity crisis. Under this circumstance, the Fed started this round of interest rate hike policy, which will inevitably lead to the return of international capital to the US dollar. Because the U.S. dollar rate hike means that the U.S. dollar index will rise, other countries’ currencies will inevitably depreciate. During this period of time, the RMB , Japanese yen , and Korean won have all depreciated to varying degrees, and this is why. Because capital itself is profit-seeking, taking into account the interest rate differential, capital must withdraw from these countries and return to countries with high interest rates. In this case, the consequences are the collapse of other countries’ assets and hyperinflation, which will hit the economies of all countries.
At present, the logic of the Fed to curb inflation is to slow down demand in order to achieve a more balanced demand and supply and achieve the goal of price stability. However, there are doubts about whether it will work. And the Fed’s tightening of monetary policy , including sharp interest rate hikes and an exit from quantitative easing , must go to a certain extent to keep inflation in check, and could be accompanied by the risk of a financial market bubble bursting and a recession.