Bosera Asset Management: The US interest rate cut cycle has begun, but the pace of rate cuts is not yet clear
Zhang Zhiwei, Chief Economist of BaoYin Asset Management Company, stated that the interest rate cut cycle in the United States has begun, but the pace of rate cuts is still unclear. It is necessary to pay attention to labor market data in the next two months. The Federal Reserve cut interest rates by 50 basis points on September 19, with significant internal disagreements. Some committee members believe that there should be no further rate cuts, while others suggest different magnitudes of rate cuts. Zhang Zhiwei pointed out that the Fed's rate cut decision may be a response to economic slowdown, providing space for other central banks to ease monetary policy
According to the financial news app Zhitong Finance, in the early morning of September 19th Beijing time, the Federal Reserve announced a 50 basis point rate cut, starting a rate-cutting cycle. Zhang Zhiwei, Chief Economist of Bosera Asset Management, stated that the dot plot of this Federal Reserve meeting shows significant internal differences among the members of the Monetary Committee regarding the future policy direction. Two committee members believe that there should be no more rate cuts before the end of this year, seven members think only a 25 basis point cut is necessary, nine members believe in a 50 basis point cut, and one member suggests a 75 basis point cut. This indicates that although the rate-cutting cycle has begun, the pace of rate cuts is still uncertain and will depend on how the labor market data evolves in the next two months.
Zhang Zhiwei pointed out that the market has been debating whether the rate cut should be 25 basis points or 50 basis points before the actual decision. It now appears that the Fed's concerns about the slowdown in the U.S. economy, especially in the labor market, may have driven the decision to cut rates. The Fed may believe that the current monetary policy actions have been somewhat slow and therefore a significant rate cut is needed to catch up with the economic slowdown.
He mentioned that the Fed's significant rate cut decision provides more room for other central banks to ease monetary policy. For China, the central bank may cut rates but the magnitude of the cut may be smaller than that of the U.S., leading to a narrowing of the interest rate differential between China and the U.S. While a rate cut in China would be beneficial for the economy, the macroeconomic outlook for China depends more on the direction of fiscal policy