Source: CCTV news client of China Central Radio and Television
Editor: Tian Yuanyuan
After the two-day monetary policy meeting, the Federal Reserve Board of United States announced on the 18th local time that it would cut the target range for the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. This is the Fed's first rate cut since March 2020 and marks a shift in monetary policy from a tightening cycle to an easing cycle.
Loading...
At a press conference after the meeting, Fed Chair Jerome Powell called the 50 basis point rate cut a "strong move" and said the Fed did not believe that "rate cuts were slow" but rather that it was a "timely move".
Powell noted that the personal consumption expenditures price index has fallen from a high of around 7% to 2.2% in August, suggesting that inflation has "eased significantly." However, he also pointed out that while inflation is falling, the United States job market is showing some signs of weakness, with an average monthly job growth of 116,000 over the past three months, which is significantly lower than earlier this year. At the same time, the unemployment rate rose to 4.2%.
The Fed has kept the target range for the federal funds rate between 5.25% and 5.5%, the highest in 23 years, since the end of July last year, as inflation has fallen less than expected. In recent months, the Fed has been under pressure to pivot on policy as inflation in the United States has eased further and the job market has shown signs of weakness.
According to the latest economic outlook expectations released by the Federal Reserve on the same day, members of the Federal Open Market Committee, the Fed's decision-making body, expect further interest rate cuts before the end of this year, of which 9 are expected to cut interest rates by 50 basis points and 7 are expected to cut interest rates by 25 basis points.
In the outlook for the future monetary policy path within the Fed, while most members are inclined to take a more aggressive approach to rate cuts, with nine expecting a further 50 basis point cuts, seven remain more cautious and expect a 25 basis point cut. This divergence reflects the Fed's delicate balance between inflationary pressures and economic growth momentum.
US experts: The Fed's interest rate hikes in recent years have had a huge negative impact
Loading...
In order to alleviate domestic inflation, the Federal Reserve began raising interest rates aggressively in March 2022, raising the interest rate target range from zero to 0.25% to 5.25% to 5.5% in a short period of time. Looking back on the current interest rate hike cycle, some experts United States believe that the Fed's approach has not only had a huge impact on the international financial market, but also has not in fact alleviated the cost-of-living crisis of the United States people.
Sorab Gupta, Senior Research Fellow, Center for China-American Studies: I think [the Fed's rate hikes] have had a huge negative impact on international financial markets because many countries around the world have been affected by the Fed's rate hikes, and the Fed's mismanagement of the interest rate cycle that started in 2022 has led to the fastest rate hikes in more than 50 years, which has also led to higher international interest rates, which we've seen exacerbate the debt crisis in many countries.
US experts: The Fed's high interest rates have not alleviated the cost-of-living crisis
Gupta also said that the Fed's interest rate hike seems to have improved United States economic data, but in fact, the general cost-of-living crisis facing United States has not eased.
Sorab Gupta, Senior Research Fellow, Center for China-American Studies: The United States economy has received a lot of fiscal stimulus, but the federal government is still facing a huge budget deficit at this stage, the cost of living crisis still exists, and although inflation has fallen, the cumulative price level over the past four or five years is still quite high compared to the wage level. The cost-of-living crisis is intensifying due to the federal government's mismanagement of the interest rate cycle, with long-term interest rates still quite high, commodity pricing also high, and high costs for businesses to borrow, mortgages, etc., and many households are negatively affected by high prices. People's lives are not as good as the economic data seems.
CCTV reporter Xu Tao: As experts say, the long-term high interest rates have caused a crisis in the cost of living for the people, which cannot be solved in a short period of time, and the pace of interest rate cuts is not expected to be as fast as the rate hike, so some experts are even worried that there is a risk of a comeback of inflation in United States.