The world has set off a "wave of interest rate cuts".
After the Fed rarely cut interest rates by 50 basis points, a wave of "interest rate cuts" was launched in many places around the world. On September 19th, Hong Kong, China Monetary Authority, Kuwaiti Central Bank, Bahrain Central Bank, UAE Central Bank and Qatar Central Bank collectively announced interest rate cuts. Before the Federal Reserve, many central banks have chosen to "rush" to cut interest rates, among which the Bank of Canada has dropped three times in a row.
It is worth noting that under the tide of interest rate cuts, the Bank of Japan has become the most special existence, and it may also be an uncertain risk point in the global financial market. At present, the market is paying close attention to the Bank of Japan’s interest rate decision tomorrow (September 20th) and the latest voice of Bank of Japan Governor Kazuo Ueda. It is widely expected that the Bank of Japan will keep the key overnight lending rate unchanged at 0.25%, but the meeting in December may raise interest rates again, which may have a certain impact on the global market.
The trend of domestic monetary policy is also the focus of market attention. Many institutions believe that the tone of China’s monetary policy has gained a rare adjustment time window and has the space to promote a new round of RRR cuts and interest rate cuts.
Tide of interest rate cuts
On the morning of September 19th, Hong Kong, China Monetary Authority announced that it would cut the benchmark interest rate by 50 basis points to 5.25%.
It should be pointed out that Hong Kong, China has implemented the linked exchange rate system, and it is not surprising to cut interest rates with the Federal Reserve this time. According to official website, under the linked exchange rate system, the exchange rate of the Hong Kong dollar remained stable within the range of 7.75-7.85 Hong Kong dollars to 1 US dollar.
In addition to the Hong Kong, China Monetary Authority, a number of central banks have also announced interest rate cuts, specifically:
The Bank of Kuwait announced that it would cut interest rates by 25 basis points to 4%;
Bahrain’s central bank lowered the overnight deposit rate by 50 basis points to 5.50%;
The UAE central bank lowered the overnight deposit rate by 50 basis points to 4.90%;
Qatar’s central bank is even more radical, cutting the deposit rate by 55 basis points to 5.2%, the repurchase rate by 55 basis points to 5.45%, and the loan rate by 55 basis points to 5.70%.
In fact, before the Fed cut interest rates, many central banks had chosen to "rush" to cut interest rates:
On September 18th, the Bank of Indonesia decided to cut the benchmark interest rate by 25 basis points to 6%, at the same time, cut the deposit interest rate to 5.25% and the loan interest rate to 6.75%.
On September 12th, the European Central Bank announced that it would cut interest rates for the second time in the year, reducing the deposit mechanism interest rate by 25 basis points, reducing the main refinancing rate and marginal lending rate by 60 basis points, and reducing the three major interest rates to 3.50%, 3.65% and 3.90% respectively.
On September 4th, the Bank of Canada cut its key interest rate by 25 basis points to 4.25%, the third consecutive rate cut this year. In July and June this year, the Bank of Canada cut interest rates twice in a row, lowering the benchmark interest rate to 4.5%. It is almost certain to cut interest rates by another 25 basis points in October;
On August 15, the Philippine central bank announced a 25 basis point interest rate cut;
On August 14th, the New Zealand Federal Reserve unexpectedly announced a 25 basis point interest rate cut, reducing the benchmark interest rate from 5.5% to 5.25%.
On July 31, the Bank of England announced that it would cut interest rates by 25 basis points and cut the benchmark interest rate from 5.25% to 5%, which was the first time since March 2020.
In June this year, the European Central Bank lowered the main refinancing rate, marginal lending rate and deposit mechanism interest rate by 25 basis points, which is the first time the bank has cut interest rates since 2019;
In May this year, the Swedish central bank announced a 25 basis point interest rate cut, which was the first time in eight years.
In March of this year, the Swiss National Bank launched the "first shot" in the year of global interest rate cuts in 2024, and Switzerland became the first developed country in Europe and America to announce interest rate cuts; In June, the central bank reduced the borrowing cost to 1.25% again.
The choice of the Bank of Japan
Against the background of "interest rate cut tide" in the world, the Bank of Japan has become the most special existence, and it is also an uncertain risk point in the global financial market.
At the end of July this year, the Bank of Japan unexpectedly announced a rate hike and decided to adjust the policy interest rate from 0-0.1% to 0.25%. This decision to raise interest rates once led to a sharp fall in the global market.
Judging from the feedback from the capital market, the Fed’s interest rate cut seems to have been fully priced. At present, the market is paying close attention to the Bank of Japan’s interest rate decision on September 20 and the latest voice of Bank of Japan Governor Kazuo Ueda, which may have a certain impact on the global market.
At present, it is widely expected that the Bank of Japan will keep the key overnight lending rate unchanged at 0.25%, but the December meeting may raise interest rates again.
Analysts said that the Bank of Japan’s monetary policy prospect has become as critical as the Federal Reserve, based on the potential impact of its policies on the yen carry trade. What the Bank of Japan officials have implied in their recent continuous statements and what the market generally expects at present is that the Bank of Japan will continue to raise interest rates.
Of the 36 economists surveyed by the Japan Economic Research Center, 19 expect the Bank of Japan to raise interest rates again in December. Before the meeting of the Bank of Japan on December 18th-19th, the Bank will pay attention to the main indicators to judge whether the economy is on the right track, including the short-term survey of the Bank of Japan in September and December, the GDP data in the third quarter and the corporate profitability in the current quarter.
In addition, most economists surveyed by Reuters expect the Bank of Japan to raise interest rates again this year, and more than three-quarters of them bet that the next rate hike will be in December.
Masahiro Ichikawa, strategist of Sumitomo Mitsui DS Asset Management Company, said that if Ueda Kazuo said at the press conference after the interest rate decision on September 20 that the economy and prices are on the normal track, but the central bank needs to pay close attention to the market, this may be a signal to raise interest rates in December this year or January next year.
Yi Kun, an analyst at Huatai Securities, believes that the Bank of Japan’s interest rate meeting is also worthy of attention. As the scissors gap between the US and Japan’s monetary policy continues to narrow and the endogenous growth momentum in Japan is restored, the wage growth exceeds expectations, which means that the yen has the motivation to further appreciate in the medium and long term. It may also bring the "spillover effect" of RMB appreciation expectations.
Domestic policy space is open?
The "opening" of the Fed’s sharp interest rate cut may narrow the spread between China and the United States. Many institutions believe that the tone of China’s monetary policy has gained a rare adjustment time window and has the space to promote a new round of RRR cuts and interest rate cuts.
Lian Ping, chairman of the Forum of China’s Chief Economists, predicted that the current Fed’s interest rate cut cycle may last as long as 14-16 months. In this context, Lian Ping believes that the tone of China’s monetary policy has gained a rare adjustment time window, which has the space to promote a new round of RRR cuts and interest rate cuts.
Lian Ping said that from the domestic environment, macroeconomic and financial indicators are relatively weak, and further support from monetary policy is urgently needed. Reasonable adjustment of the tone of monetary policy as soon as possible will help boost market confidence and change the current situation that market expectations are generally weak. From the perspective of policy coordination, in order to enhance the effect of countercyclical adjustment, it is necessary to adjust the tone of monetary policy accordingly, from "steady" to "moderately loose" in substance.
On September 19, Liu Gang, a researcher in the research department of CICC, said that if the domestic easing is stronger than the Federal Reserve, it will bring greater boost to the market; If the range is limited, which is more likely under the current realistic constraints, then the impact of the Fed’s interest rate cut on the China market may be marginal and partial.
For the expectation of policy easing in September, the market expects the call for RRR reduction to be increasingly concentrated. Including Zheshang Securities, Guojin Securities, Caixin Securities, etc., all issued opinions that the central bank of China may lower the RRR in the near future.
Qin Tai, an analyst at Huajin Securities, believes that it is imperative for monetary policy to shift to a supportive neutral stance. It is a more reasonable monetary policy expectation to maintain the forecast of a 50bp RRR cut in September.
Proofreading: Liao Shengchao















