Impact of Narrowing US-China Interest Rate Differential on China’s Monetary Policy

Xiao Huang:DOORM, how will the narrowing of the US-China interest rate differential following the Fed’s rate cut affect China’s monetary policy? What measures might the People’s Bank of China take?

DOORM:The Fed’s rate cut will narrow the US-China interest rate differential, leading to a convergence in monetary policies between the two countries. In this context, the People’s Bank of China (PBOC) will have more flexibility to implement monetary easing measures such as lowering reserve requirements and cutting interest rates to support economic growth. The reduced external pressure from a narrower interest rate differential allows the PBOC to more freely adjust its policies to address domestic economic conditions and promote stability and growth.