Fed rate cut to ease outflow pressure on yuan, open up room for policy changes: analysts

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.

The US Federal Reserve announced a cut of its benchmark borrowing rate by 50 basis points on Wednesday, brining its benchmark rate range to 4.75 and 5 per cent, according to the Federal Open Market Committee, “in light of the progress on inflation and the balance of risks”.

The move marked a reversal after 11 interest rate increases from March 2022 until July last year.

Economists and the market had been anticipating the US central bank to lower the rate by at least 25 basis points.

“The Federal Reserve’s interest rate reduction cycle is expected to further alleviate the outflow pressure faced by the yuan due to interest rate differentials, and open up room for the domestic monetary policy adjustment,” Huatai Securities said on Thursday.

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