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[이데일리 최정희 기자] As the likelihood of the US Joe Biden administration’s $1.9 trillion stimulus package passing through Congress is rising, inflation expectations are growing. As long-term interest rates, reflecting the economy, rose, the gap in long-term and short-term bond yields reached the highest level in four years.
The widening of the short- and long-term interest rate gap is a leading indicator of the economy and is a sign that the economy has entered a recovery trend. In the United States, the corona 19 vaccine vaccination rate is in the 10% range, and vaccinations are being performed at a relatively fast rate, and there are factors that are expected to recover one by one.
However, there are concerns that during the economic recovery period, a super stimulus plan amounting to $1.9 trillion may turn into an inflationary boomerang that is difficult to handle. US Treasury Secretary Janet Yellen, a former chairman of the Fed, called the “inflation fighter,” says “Don’t worry about inflation,” but the market is unbelievable. International oil prices, which have the greatest impact on global inflation, have risen for four consecutive months, rising 11% this month alone.
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◇ Long-term interest rate gap has increased, what does it mean?
According to the Federal Reserve Bank of St.Louis, the difference in interest rates (spread) between the US 2-year and 10-year bonds reached 1.08 percentage points on the 8th (local time), the highest in three years and ten months since April 11, 2017 (1.08 percentage points). I am recording it. In Korea, there is also a widening short-term interest rate gap. The difference in interest rates for 3-year Treasury bonds and 10-year Treasury bonds was 0.823 percentage points on the 9th, widening from the end of 2019 (0.323%).
Short-term interest rates mainly reflect the central bank’s monetary policy and long-term interest rates reflect the economy. With short-term interest rates not fluctuating significantly, long-term interest rate rises widen the short-term interest rate gap. As biden’s stimulus measures are more likely to pass through Congress without Republican consent, expectations for economic stimulus and inflation are reflected in long-term interest rates. The US 30-year interest rate has risen to 2% during the intraday on the 8th, and is evaluated as having crossed an important turnaround. In the report, Citi explained, “The 30-year interest rate has exceeded an important technological level,” and “the rate forecast is open from 2.44% to 2.47%.”
The widening of the short- and long-term interest rate difference is likely to stimulate the sentiment of risky assets such as stocks as it reflects the economic recovery. In fact, even on the day when the 30-year interest rate exceeded 2% during the week, the three New York Stock Exchange Indexes broke all-time highs.
Bitcoin, the flagship risk asset, is showing an increase of nearly $48,000, although it was affected by the news of Tesla’s purchase of bitcoin. It has risen more than 40% for a week.
It is also positive for bank stocks. Since deposits are affected by short-term interest rates and loans are affected by long-term interest rates, the net interest margin (NIM) can improve as the difference in the deposit-to-deposit rate widens. In fact, in the case of domestic banks, the difference in interest rates on deposits reached 1.78 percentage points until October last year, but expanded to 1.84 percentage points in December and is estimated to have increased further this year. In fact, the stock prices of major banking stocks rose after three months.
Will it end in an economic recovery? Will it be struck by inflation fear?
The key is where and how will the economic stimulus measures, which is the main factor in the widening of the short- and long-term interest rate gap, flow. Former Treasury Secretary Larry Summers said that the Biden administration’s stimulus package was “excessive” and that it could “produce the kind of inflationary pressure we’ve never seen before.”
On the other hand, Finance Minister Yellen said, “(inflation) is a risk we need to consider,” and “if such a risk becomes a reality, the state has the means to deal with it.” Rather, he stressed that it would achieve full employment next year with a massive stimulus package.
Amid mixed expectations, an analysis appears that the market is more focused on Larry Summers’ opinion. The expected 10-year inflation rate was 2.22%, the highest in six years and six months since August 13, 2014 (2.23%). In fact, there is a high possibility that these expectations will be realized to some extent due to rising international oil prices. Western Texas crude oil (WTI) rose to $58.36 per barrel on the 9th, up 11.80% this month alone, and has been rising for four consecutive months since last November. Brent oil also exceeded $60 a barrel.
Fed officials are stressing that even if inflation rises, monetary policy will remain as relaxed as it is now. Richmond Fed President Thomas Barkin (Yeon Eun) told the Financial Times (FT) that “we still need support despite concerns about rising prices.”
It is interpreted that it is because of inflation concerns that the Fed announced that it will tolerate interest rates without adjusting interest rates even if inflation exceeds 2% per year by introducing the average price target system (AIT) last year.
As the money poured out last year leads to higher raw material prices, such as asset prices and international oil prices, it stimulates inflation, and if the inflation rate becomes more likely to exceed the target of 2%, it will immediately lead to a tapering tentrum. This is because the possibility is high.
This raises the possibility of a paving stone to prevent this. Even for Treasury Secretary Yellen and Fed Chair Jerome Powell, who know inflation because we fight often, inflation concerns are a variable that can shake this year.
A financial industry official said, “Inflation can become a black swan.” “It will be a little different from the situation since the 2008 financial crisis when international oil prices plunged from $100 to $20 and house prices fell together.”
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