news

on september 18, local time, the federal reserve announced that it would lower the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. this is the first rate cut by the federal reserve since march 2020. why did the federal reserve cut interest rates? what does this rate cut mean? what impact will the rate cut have? in particular, what impact will it have on my country?

fed chairman: inflation eases job market weakness

federal reserve chairman powell called the 50 basis point rate cut a "powerful action" and said the fed did not think it was "slow in cutting rates" but rather considered it a "timely move."

powell pointed out that the us personal consumption expenditure price index has dropped from a high of around 7% to 2.2% in august, indicating that inflation has "significantly eased." however, he also pointed out that while inflation is falling, the us job market has shown some signs of weakness, with the average monthly employment growth rate in the past three months significantly lower than earlier this year. at the same time, the unemployment rate has risen and the labor market situation is not as good as previously expected.

as inflation has not fallen as fast as expected, the fed has kept the target range for the federal funds rate at 5.25% to 5.5% since the end of july last year, the highest level in 23 years. in recent months, as the inflation situation in the united states has further eased and the job market has shown signs of weakness, the fed has faced pressure to shift its policy.

according to the latest economic outlook forecast released by the federal reserve on the same day, members of the federal open market committee, the federal reserve's decision-making body, expect further interest rate cuts before the end of this year.

the easing cycle begins and international financial markets are experiencing fluctuations

after the highly anticipated announcement of the federal reserve's interest rate cut policy, the three major stock indexes in new york fluctuated and closed down, and the performance of international financial markets was differentiated.

after the federal reserve announced a 50 basis point rate cut, the three major u.s. stock indexes, the dow jones, s&p 500 and nasdaq, surged in the short term before closing down in a volatile manner; by noon beijing time on the 19th, most of the major global stock indexes fell. the international spot gold price hit a new record high before falling back. most of the major global commodities also fell.

analysts pointed out that the fed's interest rate cut this time marks the shift of the us monetary policy from a tightening cycle to an easing cycle. in recent months, as the us inflation situation eased and the job market showed signs of weakness, the inhibitory effect of high interest rates on the economy has gradually become apparent. therefore, the fed had to choose a larger interest rate cut than expected.

wen bin, chief economist of china minsheng bank:the federal reserve started cutting interest rates mainly because it was worried that the u.s. economy might experience a hard landing due to shrinking demand. so cutting interest rates now will help boost domestic demand and thus prevent a hard landing of the economy.

dong ximiao, chief researcher of citic bank:the current high interest rates have a significant inhibitory effect on the economy. a rate cut may slow down the us economic downturn, which will be conducive to the steady recovery of the global economy. after the fed cuts interest rates, the us dollar index will weaken, and global capital may return to emerging markets, which is expected to inject liquidity into emerging markets.

the fed's interest rate cut will have an impact on my country's import and export companies

the federal reserve’s interest rate cut has caused turmoil in the international financial market. so what direct impact will it have on my country?

experts said that my country's monetary policy is based on my country's own needs, mainly considering the needs of china's economic development, matching the money supply with expected economic growth and price level targets, etc. however, the spillover effects of the fed's policy adjustments will also have a certain impact on my country.

after the fed cuts interest rates, the misalignment of the monetary policy cycles between china and the united states will gradually improve. if the united states enters a cycle of interest rate cuts, the external constraints on my country's monetary policy will be reduced, and the space and amplitude of monetary policy adjustments will be greater.

with the federal reserve's initiation of rate cuts, it should be said that global dollar liquidity will further ease, which will also create a relatively loose monetary environment for the world. as the interest rate gap between china and the united states narrows, our next monetary policy space will also be further expanded, which will help our supportive monetary policy to further play a role, thereby further consolidating the trend of economic recovery.

as a financial institution dedicated to supporting the development of my country's foreign trade, experts from the export-import bank of china told reporters that changes in the us dollar interest rate will have a series of impacts on global investment, consumption, financial market supply and demand, asset pricing and other aspects.

du xijiang, general manager of strategic planning department of china export-import bank:for my country's import and export companies, they should focus on several issues. first, the fluctuation of major currency exchange rates, we should pay attention to exchange risk. second, the changes in importer demand and commodity pricing, we should pay attention to market risks. third, different countries and regions are affected to different degrees, we should pay attention to country and regional risks.

in jiangsu, a major foreign trade province, bank staff told reporters that many banks have recently lowered the interest rates on long-term us dollar deposits and loans in advance. at the same time, they have also issued risk warnings to foreign trade companies in advance.

how do my country's foreign trade companies respond to new market changes?

so, how should my country's foreign trade enterprises deal with the new changes in the market after the fed's interest rate cut? experts have also put forward suggestions.

after the fed cuts interest rates, the us dollar is likely to depreciate, while the rmb will appreciate relatively. generally speaking, this will bring certain benefits to imports because the cost for companies to import raw materials and high-tech products will be reduced; but it will have a certain impact on exports. the relative appreciation of the rmb will make chinese goods more expensive in the international market, which may affect the order volume.

experts especially remind that when companies use financial instruments to guard against exchange rate risks, they must do so in conjunction with their own operations. they must not guess or gamble on exchange rates, or use exchange rates as a tool or means to make profits.

what impact will the fed’s interest rate cut have on individuals?

in addition to affecting corporate production and operations, foreign trade imports and exports, will the federal reserve's interest rate cut also have an impact on our personal lives?

due to the increase in the purchasing power of the rmb, the cost for domestic residents to study, travel, consume and invest abroad will be reduced.

for families with students studying abroad, exchange rate fluctuations may have a greater impact on their expenses. therefore, for ordinary individuals, a better way may be to adopt a method similar to fixed investment in funds. when you think the exchange rate has reached your psychological price, you can buy a portion in batches, or buy a portion every month or every two months at a certain time. this can smooth out the fluctuations in the exchange rate and get a relatively average exchange rate in the market. don't try to copy the lowest point.

experts also said that if the us dollar index falls significantly, the prices of some imported goods will also be reflected, which will help promote consumption. in terms of investment, due to the high interest rate of us dollar deposits, the yield of us dollar deposits and financial products linked to us dollar interest rates is also high. with the fed's interest rate cut, the investment value of us dollar financial products will also fall accordingly.

in addition, the fed's interest rate cut will affect the flow of global funds, and global emerging markets, including china, may attract more attention from funds. exchange rates, gold prices, and bond markets will also fluctuate more frequently, and the public needs to pay more attention to market changes when investing and consuming.

(source: cctv news client)