Fed rate cut to reduce yuan outflow pressure, open up room for China’s easing: analysts
US Federal Reserve officially kicked off a rate-cutting cycle by announcing a half a percentage point rate cut on Wednesday
As the US Federal Reserve officially kicked off a rate-cutting cycle, China and other Asian economies are likely to see more room to carry out easing policies and boost growth, analysts said.
This marked a reversal after 11 interest rate increases from March 2022 until July last year.
The rate cut “marks the beginning of a new policy cycle, carrying a significant signal”, GF Securities said on Thursday.
Sarah Tan, an economist at Moody’s Analytics, said the rate reduction could provide the People’s Bank of China with more room to ease monetary policy to address weak domestic demand.
“Now as the interest rate differential with the US narrows, any rate cuts by the PBOC will less likely hurt demand for the yuan and reduce the risk of a spike in capital outflows. This will also help to woo back foreign investors,” she said.
