Fed cuts interest rates again! What international impact will it bring

On December 10th the Federal Reserve may cut interest rates for the third time in a row. The latest jobs numbers came out and were better than expected, 227,000 new jobs and an unemployment rate of 4.2%. Market expectations for a rate cut in December jumped to 85%, up from 67%. It feels like a 25 basis point rate cut is okay this time. Both the nonfarm payrolls and the unemployment rate were a bit higher than the market expected. As soon as the two figures were released, market expectations for a Fed rate cut in December jumped from 67% to 85%. Since A rate cut in December is almost certain, there is no reason why the big A shares should not continue to rise. In fact, the market is not worried about new issues, but about low-quality companies in the mix. Therefore, the quality of the IPO is more important than controlling the pace of the IPO.

Another interest rate cut by the Federal Reserve will have a complex and multi-faceted impact on the international community. One is the impact on the global economy, interest rate cuts usually mean an increase in the money supply and a relative decline in the value of money, which can trigger global capital reallocation. Investors may seek markets with higher returns, causing capital to flow from dollar assets to other higher-yielding assets. A weaker dollar can make dollar-denominated imports more expensive, adversely affecting the terms of trade of importing countries. At the same time, exporting countries may benefit from a weaker dollar as their products become more competitive in international markets. Interest rate cuts may lead to volatility in financial markets such as stock and bond markets, and investors need to re-evaluate asset values and risks. If the market sentiment is too optimistic, it can also trigger asset bubbles and speculation, increasing market volatility. Interest rate cuts usually lead to a depreciation of the local currency exchange rate, which can have an impact on international trade and cross-border investment. Exchange rate volatility can trigger cross-border arbitrage activity, further affecting global capital flow patterns. The Fed's interest rate cut may mark an important turning point in the global economic and financial landscape, and all economies need to prudently respond to the challenges brought by the policy shift and seize the development opportunities in the economic restructuring.

The second is the impact on financial markets, where interest rate cuts are generally seen as positive news because a lower interest rate environment helps boost corporate profitability and market valuations. As a result, the stock market could get a boost and see an upward trend. Bond prices have an inverse relationship with interest rates. As a result, interest rate cuts usually lead to higher bond prices and lower yields. This could trigger a repricing and restructuring of the bond market. A weaker dollar can put upward pressure on other major currencies, causing volatility in the foreign exchange market. At the same time, it may also lead to changes in the pattern of international capital flows and affect the stability of exchange rates of national currencies.

The third is the impact on international trade. The Fed's interest rate cut has led to the depreciation of the US dollar and the relative appreciation of other countries' currencies, which may weaken the price competitiveness of these countries' exports in the international market. However, the depreciation of the dollar makes the relative appreciation of other currencies, and the cost of imported goods will be reduced, which will benefit the import enterprises. As domestic consumption and investment demand in the United States increases, the demand for imported goods is likely to rise accordingly, creating more trade opportunities for countries that export to the United States.

Fourth, the impact on international policy coordination. The Fed's interest rate cut may have a spillover effect on the monetary policies of other countries, affecting the independence and effectiveness of these countries' monetary policies. Therefore, central banks need to strengthen policy coordination and jointly address the challenges of global financial markets. In the context of deepening global financial integration, financial regulators of various countries need to strengthen cooperation to jointly prevent financial risks and maintain financial stability. The Fed's interest rate cut may trigger volatility and risk accumulation in the global financial market, which requires close attention and corresponding regulatory measures by national regulators.

To sum up, another rate cut by the Federal Reserve will have a broad and far-reaching impact on the global economy, financial markets, international trade and international policy coordination. Countries need to pay close attention to changes in the international economic and financial situation, strengthen policy coordination and financial regulatory cooperation, and jointly address challenges and risks in the global financial market.