Will the US Federal Reserve cut interest rates to 0? How will it affect China?

China News Client Beijing March 16 (Xie Yiguan) The Federal Reserve announced on the 15th local time that it will lower the target range of the federal funds rate to an ultra-low level of 0-0.25%. Can the Fed's interest rate cut to zero give a rest to the US stock market that plunged last week? How will it affect China?

Data Map: Federal Reserve Chairman Powell. Photo by China News Agency reporter Chen Mengtong

Can a rate cut stop U.S. stocks from diarrhea?

The Federal Reserve issued a statement on the 15th that the outbreak of the new crown pneumonia outbreak disrupted many countries, including the United States, and that global financial markets were also significantly affected. Available economic data indicates that the US economy has entered a challenging period.

Just one week after Beijing time, the global financial market was stricken by the new crown pneumonia epidemic and the oil price war, staged a "black week." Last week, U.S. stocks plummeted, with rare second and third fuses in history. The Dow fell 10.36%, the Nasdaq fell 8.17%, and the S & P 500 fell 8.79%.

Can the Fed's rate cut save US stocks in crisis?

"This is the biggest move in the history of the Federal Reserve." Li Daxiao, chief economist at Anglo Securities, said that the United States officially entered the era of zero interest rates and restarted quantitative easing at the same time, which has an important role in stabilizing global economic growth, and is especially positive for stabilizing the US stock market. .

However, Changjiang Securities believes that the impact of monetary policy hedging during crises is usually extremely limited. The current US stock valuation is still significantly higher than the bottom position at the moment of historical crisis. If the epidemic continues to accelerate overseas in the future, there will still be a large tail risk in overseas markets.

Summary of the weekly changes in important global stock indexes (March 9-14).

According to Ren Zeping, chief economist of Evergrande Group, "According to the successful experience of China and Singapore, in the face of a large-scale outbreak of epidemic, we must first control the epidemic and restore production and life, provide short-term liquidity and tax reduction, and then gradually stimulate Economic growth and employment. The Fed's direct currency floods, the steps are wrong. "

"During the spread of the epidemic, neither interest rate cuts nor quantitative easing can change the consumer behavior of the residential sector and the investment behavior of the corporate sector, and therefore cannot truly stimulate the overall demand of the real economy." Yuekai Securities pointed out that monetary easing has the effect of reversing corporate credit. The function of the premium is also relatively limited, and the risk of default in the corporate sector is difficult to contain.

Ren Zeping pointed out that the global financial market is avalanche, and the epidemic situation is just the fuse, the root cause is the economic, financial, and social vulnerability of long-term oversupply of currencies. Kerry Craig, global market strategist at JPMorgan Asset Management, believes that although the Fed has just taken action to support growth, the US economy may still slip into a recession, but this recession will not last.

After the US Federal Reserve announced interest rate cuts, the market reaction was not good. The yield on 10-year US Treasury bonds fell by 32 basis points. US stock index futures continued to fall, triggering trading restrictions during the session. As of press time, the S & P 500 index, Dow futures, and Nasdaq futures all fell more than 4%.

Data map.

Multiple countries or regions follow the Fed to cut interest rates

The U.S. Federal Reserve cut interest rates on the weekend and dropped a "bomb" on global markets. On the 16th, many countries and regions in the Asia Pacific followed the Fed's footsteps and adopted loosening policies such as interest rate cuts to increase market liquidity.

On the 16th, the Bank of New Zealand announced that it will cut its official cash rate by 75 basis points to 0.25%, and it is expected that this rate will remain unchanged for the next 12 months.

RBA Chairman PhilipLowe said in a statement on the website that the RBA will announce further policy measures on Thursday to support the Australian economy. "Ready to buy Australian government bonds in the secondary market."

The Bank of Japan also announced an early meeting on monetary policy. The UBS Wealth Management Investment Director's Office expects that the Bank of Japan will cut interest rates by 10 basis points this week and may continue to increase ETF purchases.

"Facing the worst global health crisis in more than a century, fiscal and monetary policy makers around the world will have to do everything in their power to avoid an economic recession that has become unavoidable from the current point of view. Doom for the crash. "Said Joachim Fels, global economic adviser to Pimco.

According to incomplete statistics, since March, the Bank of Australia, the Federal Reserve, the Bank of Malaysia, the Bank of Saudi Arabia, the Bank of the United Arab Emirates, the Bank of Bahrain, the Hong Kong Monetary Authority of China, the Macau Monetary Authority of China, the Bank of Canada, the Bank of Argentina, the Bank of England, the Bank of Iceland, The Central Bank of Serbia and the Norwegian Central Bank have initiated interest rate cuts.

Information map of the People's Bank of China. Photo by Li Huisi issued by China News Agency

How will it affect China?

——Will China cut interest rates?

Market analysis generally believes that with the United States and other countries having implemented loose monetary policies, the external constraints on China ’s monetary policy marginal easing have eased.

On the 13th, the People's Bank of China announced a targeted reduction on March 16th to release long-term funds of 550 billion yuan. However, on the 16th, the one-year MLF (Medium-Term Lending Facilitation) operation conducted by the People's Bank of China operated 100 billion yuan with an operating interest rate of 3.15%. Interest rates remain unchanged.

"China will take me as the mainstay and comprehensively consider the risk of RMB appreciation, hot money inflows, and risks of internal inflation and asset price bubbles." Chen Guo, chief strategy analyst at Anson Securities, said that the spread between China and the United States indicates that China is still in a favorable position.

On the 15th, Sun Guofeng, director of the Monetary Policy Department of the People's Bank of China, said that the People's Bank of China will continue to take a variety of measures to promote a marked decline in loan interest rates, and use a variety of monetary policy tools to maintain reasonable and sufficient liquidity.

"Continue to advance the LPR (loan market quoted interest rate) reform, orderly advance the conversion of existing floating interest rate loan pricing benchmarks, guide and improve the internal transfer pricing (FTP) system of commercial banks, embed LPR into the bank's internal interest rate mechanism, and improve LPR. Transmission mechanism to continue to unleash the potential of reforms to promote lower real interest rates for loans, "said Sun Guofeng.

——Will it impact the A-share market?

Under the premise of the previous RRR cut policy, the market believes that the Fed's interest rate cut will not cause much shock to the A-share market, but will also bring opportunities.

Li Daxiao said that China ’s monetary policy space has increased, and the implementation of the central bank ’s RRR cut has been implemented in 16 sunsets. In addition, China ’s epidemic control has achieved significant results, which is of great significance to the stability of the A-share and Hong Kong stock markets.

Guosheng Securities believes that A-shares have their independence, and will continue to have a wide range of shocks in the short term. Opportunities will emerge in the shocks. The logic of policy dividends and liquidity support is still there.

"The relative advantages of A-share fundamentals are better than overseas. Loose external currencies also help cut off the transmission of overseas liquidity risks to China." Yuekai Securities believes that A-shares still have structural investment opportunities.

-Does it have an impact on the Chinese property market?

Zhang Dawei, chief analyst of Zhongyuan Real Estate, pointed out that "after the epidemic, the downward adjustment of the property market is inevitable, but the reduction in the real estate market will help slow the decline in the real estate market and have a stable effect on the market."

Zhang Dawei said that the RRR cut on the 16th can release more low-cost long-term funds, which will help reduce the financial cost of financial institutions, and then reduce the financing rates of private and small and medium-sized micro-finance. The RRR cut will also help loosen subsequent bank lending policies.

In the opinion of analysts, after the Fed cuts interest rates, China's monetary policy space will increase. "If domestic interest rates continue to be reduced in the future, it will be conducive to corporate loans, and some of them will not be excluded from real estate." Zhang Dawei said. (Finish)