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Fed rate cut gives China room to move as Beijing eyes more economic stimulus
US Federal Reserve lowered its benchmark rate less than a day before China is expected to release its latest economic stimulus plan
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A quarter of a percentage point interest rate cut by the US Federal Reserve has provided a tailwind for China to manoeuvre its policy stance, and fuelled market speculation that Beijing may double down on economic stimulus as a meeting of its top legislative body draws to a close on Friday.
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Speculation has jumped as the world’s second-largest economy could face more pressure after president-elect Donald Trump secured a return to the White House.
On Thursday, the US Federal Reserve lowered its benchmark rate to a range between 4.5 and 4.75 per cent with a second consecutive cut.
It came less than a day ahead of the release of an economic plan by the National People’s Congress Standing Committee, with a proposal to increase the local bond quota having already been reviewed by lawmakers.
“A rate cut in the US also leads to rate cuts in other advanced and emerging markets, including China,” said Dong Jinyue, principal economist at BBVA.
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Beijing’s shift of stance to stimulus, following the cuts of policy rates and bank’s reserve requirement ratio by the People’s Bank of China at the end of September, came just after the US Federal Reserve kicked off a rate-cut cycle with a half a percentage point cut.
Lower demand from the US could impact China’s industrial output and the overall trade balance
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