With Fed Chairman Jerome Powell's interest rate cut, it is already foreseeable that the Fed's rate hike cycle is essentially over, and it seems that a rate cut is about to become a reality.
This is obviously good news for the global economy.
In the past year and a half, the world has been affected by the Federal Reserve's interest rate hikes, and all countries have experienced a period of turmoil, including China, although they have long been psychologically prepared, but the past year has also had a certain impact on the economic situation, making people feel that life is not easy.
Now, with Powell announcing that the tightening cycle is coming to an end, the world is breathing a sigh of relief.
For China, the window for economic stimulus seems to be gradually opening, and it is no longer subject to the external environment and is no longer forced to resort to drip market bailouts, but is able to respond to challenges in a more targeted manner.
After the just-concluded ** economic work conference, it is expected that a series of policies will be introduced to promote the stabilization and recovery of the economy.
However, of all possible policies, nothing is more expected than an across-the-board rate cut.
After all, this is one of the most direct, comprehensive, and effective measures.
In the past period, due to the Fed's continuous interest rate hikes, the widening of the interest rate gap between China and the United States, the depreciation of the RMB exchange rate, and the frequent outflow of funds, we have been constrained in cutting interest rates.
However, now that the Fed's tightening policy has come to an end, it has created more room for our country to cut interest rates.
Although in the past 12 months, the central bank has not cut interest rates across the board, only increasing the medium-term lending facility (MLF) and lowering the deposit rate.
But there are still questions about whether there will actually be a full rate cut in the future.
We wait and see, and look forward to further clarity on relevant policies to provide more support for the stability and development of China's economy.
My judgment is:There may be a little more RRR cutlprThere may also be some adjustments, but before the Fed actually starts cutting rates, I'm afraid we are unlikely to cut rates across the board, or evenEven in the early days when the Fed began to cut interest rates, China may not have followed suit
Indeed, there may be divergent views on an across-the-board rate cut, as previous non-across-the-board cuts were mainly due to concerns about exchange rate impact and capital flight.
However, with the Fed's interest rate cut expectations increasing and the RMB exchange rate recovering, a moderate rate cut may no longer have a negative impact on the whole in the current situation, which is indeed reasonable.
Judging from the current situation in China, interest rate cuts seem to be the most effective means to promote economic recovery.
However, why do some people still think that a full-blown rate cut is unlikely?
This can be considered from the dual perspectives of the global economic cycle and the Sino-US financial war.
First of all, the Fed's interest rate cut has not yet been conclusively confirmed.
Although Powell recently expressed his support for interest rate cuts, he still insisted on hawkish remarks only half a month ago, suggesting that high interest rates will be maintained for a long time, and even did not rule out the possibility of continuing to raise interest rates.
Some U.S. economic data, such as non-farm payrolls added 19 percent in NovemberThe 90,000 people who exceeded expectations and the unemployment rate was lower than expected also supported his tough stance at the time.
This change in attitude from eagle to pigeon in a short period of time is puzzling.
There are different speculations in the market on this point, with some believing that the real situation in the US economy may be more serious, forcing Powell to no longer adhere to the current tightening policy.
There are also some conspiracy theories that the Fed may be playing a back-and-forth tactic, deliberately releasing signals that the tightening cycle is over, and then quickly cutting interest rates to save the market.
However, the question of whether the US economy is really facing serious problems, and whether it will not be able to hold on, is still only speculation in the market.
The most real underlying data is currently known only to the core ruling circles of the United States.
It would be overwhelming if the US used this message to engage in a drag-and-knife scheme by misleading us into cutting rates first, and then they resorted to a different strategy or even raised rates again!
These speculations are all likely to come true, and in addition to these speculations, there are two concerns that cannot be ignored:
On the one hand, inflation could rise again, forcing the Fed to tighten again, which means that the Fed may already struggle to maintain its current rate cut plans.
But the problem is that the interests of the United States are not necessarily in line with the interests of other countries, such as Russia, which may expect to force the Federal Reserve to continue raising interest rates at a high level by driving up inflation in the United States.
Eventually, various problems may erupt at the same time, creating a huge storm that will push the dollar off its altar.
The gradual rise of Russia on the battlefield between Russia and Ukraine, the continued escalation of the Israeli-Palestinian conflict, and the recent outbreak of Houthi rebels in Yemen to obstruct shipping due to OPEC's efforts to adjust oil prices appear to be closely related to Russia's offensive against the US financial system.
However, the United States is no longer the country it once was, they cannot navigate all the scenes at will, and many situations are beyond their control.
Although the United States sees China as its number one competitor, China is still actively pursuing globalization and is willing to cooperate with the world.
Therefore, despite some competition with the United States, China does not want to take an overly aggressive approach.
Their goal is to reduce U.S. influence and dollar influence, not to quickly lose U.S. dominance.
After all, the U.S. global economic system collapsed too quickly for China to take over quickly, and China's global business would be adversely affected by a chaotic world situation.
In contrast, Russia has been forced to Yangsan by the United States, and its economy is also fully getting rid of its dependence on the United States.
Therefore, Russia does not care whether the United States collapses, but believes that the collapse of the United States is more beneficial and in its interests.
At present, Russia is making all-round efforts to constantly seek opportunities in various aspects.
It remains to be seen whether the Fed will be forced to raise interest rates a second time due to various unexpected circumstances that have led to soaring inflation.
If it is really forced to take a second rate hike, even if it is a forced situation, the United States itself will be in trouble. However, in the short term, we will not be able to avoid some adverse shocks.
Therefore, at a time when the situation is still unclear, it is not safe to cut interest rates rashly.
Another cause for concern is the imminent outbreak of the economic crisis, which will usher in the culmination of a major change unseen in a century.
The United States has relied on printing money to sustain its economy in recent years, which has led to huge bubbles and huge debts.
Although the United States has always claimed to be conducting a soft landing, the current situation suggests that it may be very difficult for the United States to achieve a soft landing due to the inability to effectively adjust the economy.
Even though a rate cut may stabilize the economy in the short term, historically, economic crashes tend to erupt after they begin to cut rates.
Considering that the hole in the US economy is so deep this time, even if a soft landing is achieved, it will be difficult to avoid a round of economic crisis.
If it's a hard landing, then a Great Depression could be ushered in. This poses a huge constraint on our current interest rate cut policy, because the policy reserve is limited.
If we adopt aggressive policies now, and wait until the economic crisis or even the Great Depression breaks out in full, the policy tools at our disposal may not be enough.
This will make us have to follow the predicament of the United States and become helpless undertakers.
If we can temporarily curb our impulses now, retain as much as possible the trump card of interest rate cuts to stimulate the economy, and stimulate the economy with the help of economic restructuring, industrial upgrading, and limited fiscal means, we can hope to accomplish the current task of stabilizing and rebounding the economy.
With such a strategy, we will not only be able to strengthen the economic chassis, but we will also be able to have sufficient policy tools in the event of a possible final and worst shock.
This will ensure that our economic recovery is effective and sustainable, and that even after the US economic crisis, we have the opportunity to lead the global economic recovery, while maximizing the scope of economic influence and building a strong Chinese ecosystem.
This is a strategic analysis from a macro perspective.
However, from the strategic perspective of the Sino-US financial war, if China cuts interest rates now, although it is beneficial to the current economic stability and solid foundation, it may also contribute to the interests of the United States to a certain extent, and even benefit the United States more.
Why?
Considering the influence of China's economy and the high correlation between the Chinese and US economies, China's adoption of strong interest rate cuts to stimulate the economy is actually beneficial to the United States, and this benefit is not small.
The rate cut means that China has helped the United States alleviate some of its economic woes to some extent.
However, it should be noted that the high degree of economic correlation between China and the United States does not mean that they can rub each other at will, especially in the current environment of the financial war between China and the United States.
The essence of this war is that the two sides support each other to see who can't hold it first.
If we rush to cut rates now, we will be consuming our own key policy tools, and this depletion will not only mean less leverage available to us in the future, but will also send a message to the United States that China may not be able to hold up before the United States.
Considering Powell's recent rhetoric, if it is not from the perspective of conspiracy theories, it is likely that the United States thinks that it may not be able to hold on first, so it takes stop-loss measures in advance.
But as soon as the United States believes that China cannot hold on, especially if it cannot hold it before itself, the United States' attitude will immediately change.
As long as China can be defeated in one fell swoop, this ** is too big for the United States.
Therefore, it is better for us to wait for a while and be patient.
After all, we have a strong national strength, and even if we need to use some reserves and find some residual resources, we can continue to support it for a while.
In addition, China's strong economic stimulus will also provide some blood for the United States to a certain extent, so that they have the capital to stay for a while.
If this happens, the Fed should cut interest rates, but because of our actions and change to no interest rate cuts, it will not only offset the effect of our economic stimulus, but also waste the few interest rate cut chips in our hands.
In the process of deep thinking, we realized that for the Chinese economy, an overly aggressive interest rate cut policy could adversely affect the outcome of the financial war between China and the United States.
Despite the difficult situation, on the verge of economic collapse, overly aggressive policies may be a last resort.
Powell's change in attitude also shows us that when countries face economic difficulties, they often need to weigh the lesser of two evils.
However, China's economy is not currently in an irretrievable situation.
Despite a difficult period, China's economy has shown a trend of stabilizing and rebounding through a year of structural adjustment and industrial upgrading, although this trend has not yet been widely manifested among the general public.
In such a situation, it is all the more important that we keep the policy tools at our disposal and not be overly hasty in taking extreme measures.
Such a conservative strategy will help ensure our flexibility and ability to respond to the U.S.-China financial war, the turning point of the global economic cycle, and the greatest changes unseen in a century.
Rather than taking extreme measures, it is better to remain cautious in the context of uncertainty and provide more flexibility for future variables.
Therefore, our decision-making should focus more on medium- to long-term robustness rather than short-term overreactions.
By skillfully retaining policy tools, we will be better able to adapt to the challenges that may arise in the future, maintain control of national economies, and better lead the global economy.
In this turbulent and changing time, China will demonstrate resilience and wisdom as the backbone of the global economy.