“Is inflation a problem? Yes, it is a problem for the United States, it is not a problem for China, it is not a problem for Japan. It has become a problem for the European Union and it varies in degrees of urgency as far as Asia is concerned and a lot of other countries,” says Andrew Freris, Chief Strategist, UCAP HK Asset Management.
How do you think the markets will react if there is a 55 bps hike and what will the reaction be if it is a 75 bps hike?
I am utterly and completely dis-concerned about what the Fed is going to do. Yes, it is going to hike rates by 75 bps but what the markets are blindly missing out is of the four biggest economies in the world, only one is increasing interest rates; the European Union may hike rates by 25 bps in July and perhaps 50 bps in September. The Bank of Japan is keeping zero interest rates for the duration and China is about to cut interest rates again. It has cut interest rates already three times.
This obsession with the United States is not only unnatural, it is completely stupid because United States is only one-fourth of the global economy. The rest of them do not have loosening monetary policies but they are not obsessed about increasing interest rates at any cost. Yes, the Fed is going to increase but I am focussing very strongly on the other three economies on which there are very good opportunities for making money and not just in the United States. This is absurd.
What are the other things that you are watching out for? Inflation is something which is plaguing a lot of economies including the US. Almost 60 central banks have raised rates this year by more than 50 bps. Isn’t that something which will continue the risk-off sentiment and create a flow of money from equities into safer bets?
Well, the United States does not matter and it is not that an increase in interest rates in the United States do not matter; they do matter but to just be blind on whatever happens to the rest of the world is stupid and it does not help one make money. You are asking me if inflation is a problem, yes, it is a problem for the United States, it is not a problem for China, it is not a problem for Japan, it has become a problem for the European Union and it varies in degrees of urgency as far as Asia is concerned and a lot of other countries. So, this obsession with the United States, the belief that whatever happens in the United States happens to all of us, is not right. No, it does not. It does not happen to Japan, and it does not happen to China.
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