Page 15 - Issue-47

ELITE
Vol.1, Issue 47, September 2022 ELITE

In the context of economic globalization, how
does the rise in the American interest rate

influence the global economy ?
Mariam Younis, Level 3- Economics
In the face of increased inflation in the
United States, the Federal Reserve (FED) mariam.younis2020@feps.edu.eg
keeps increasing the key interest rate, Market of goods & services
which is generally the overnight interest As already mentioned, the decision to
rate set by a country’s central bank to raise the key interest rate is taken by the
regulate economic activity. According to FED to combat the increased inflation
“Le Point”, the French weekly news which had reached 8.5% in July this year.
magazine, this increase was the largest In September, we saw inflation fall to 8.3%;
increase since 1994. In the context of but unfortunately, according to the US
economic globalization, where the world is Bureau of Labor Statistics, housing, food
highly connected through international and even car prices continued to rise. In
trade, foreign investment and supply other words, lower inflation is due to lower
chains, This increase influences not only oil prices, not lower living costs.
the American economic condition but the Economists believe that the United States
global economy as a whole. As Jacques is the world’s largest economy, showing
Chirac said, “globalization is a new face of only a few signs of slowing demand. In the
human adventure”. We will therefore know short term, rising interest rates do not
the impact of the increase in the FED key abruptly reduce inflation, but rather lead
rate on the global economy in general in to lower consumption. That is to say,
the context of this new human adventure consumers, trying to benefit from the
in three different aspects. The first aspect increase in policy rates, are beginning to
will focus on the American economic increase their savings and reduce their
situation. The second aspect will focus on spending. This forced slowdown in
the rest of the world. In a second place, consumption may weigh on the US
the condition of world exchanges and the economy, raising fears of a “recession” or
price of oil will be presented. Finally, we a “stagflation”. This slowdown is very
develop the economic health of harmful economically and will be felt in
developed and developing countries. the labour market.
The condition of the American market Labour market
In order to explain the American economic Probably, this drop in consumption
situation, we will present three markets of negatively influences corporate profits.
great importance: the goods and services These companies, like any capitalist entity
market, the labour market and finally the aiming to increase their profits and
market of funds. Through this explanation, minimize their costs, will therefore reduce
Back we can analyze the economic condition of their demand for jobs or even lay off a few
Back
both the producer and the consumer. That
workers; this will cause unemployment to
To FEPS will give us more or less a complete view rise again. 13
To FEPS
To FEPS
of the American market.