Hong Kong Monetary Authority cuts interest rates with the Federal Reserve! Will the People's Bank of China join the global wave of easing?

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Source: Global Forex Network With the Federal Reserve's emergency rate cut of 50 basis points overnight, the global central bank's rate cut has undoubtedly begun. News on the 4th Beijing time, the Hong Kong Monetary Authority followed the Fed's rate cut, and the benchmark interest rate was cut by 50 basis points to 1.50%. Analysts said that for the dollar-linked Hong Kong-linked exchange rate, it must keep pace with US interest rate policies. The Hong Kong Monetary Authority (HKMA) has adopted the same approach in many previous interest rate adjustments by the Federal Reserve. HKMA CEO Yu Minhong said that the United States is actively using monetary policy to deal with the potential risks of the epidemic, but there is still a lot of uncertainty in the future changes in the epidemic and it is expected that financial markets will still fluctuate significantly. Yu Minhong said that the Fed's decision to cut interest rates by 0.5 percentage points outside the original interest rate meeting and reiterated that it will continue to pay attention to developments and use policy tools to support the economy, indicating that the Fed will actively use monetary policy to deal with possible economic risks brought by the outbreak. "There is a lot of uncertainty about the future changes in the epidemic. Financial markets will still have great volatility. Investors must manage their risks well," he said. He also pointed out that the trend of Hong Kong dollar interest rates is not only affected by changes in US dollar interest rates, but also depends on factors such as the supply and demand of local funds. HKMA will continue to monitor market conditions, maintain the orderly operation of the Hong Kong dollar and foreign exchange markets, and ensure that the Hong Kong dollar remains stable under the linked exchange rate system. On Tuesday, the Federal Reserve announced an emergency rate cut of 50 basis points to 1.00% -1.25% in response to the economic impact of the new pneumonia epidemic. This is the largest interest rate cut since 2008, while reducing the excess reserve ratio (IOER) by 50 basis points to 1. 1%. The Fed said that the fundamentals of the US economy remain strong. However, new coronaviruses pose evolving risks to economic activity. The Fed is closely monitoring developments and its impact on the economic outlook and will use its tools to take appropriate action to support the economy. In fact, before the Federal Reserve cut rates on March 3, two central banks in the Asia-Pacific region-the Australian Federal Reserve and Malaysian Central Bank-cut rates separately, both of which exceeded To market expectations. After the Fed cut interest rates, the Saudi Arabian central bank, the UAE central bank and other central banks also followed suit and announced a 50 basis point rate cut. Analysts pointed out that after the Federal Reserve announced an emergency rate cut to curb the economic losses caused by the new crown virus, policymakers at other major central banks have come under greater pressure, and investors hope they can follow the Federal Reserve, although these central banks have little room to cut rates. Currently, the industry is widely expected to cut interest rates on Wednesday. The Bank of England and the European Central Bank may also cut interest rates this month. Krishna Guha, deputy chairman of Iveco International and a former Fed official, said the Fed's decisive action would put tremendous pressure on other countries. European Central Bank The European Central Bank's deposit interest rate reached an all-time low of -0.5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price 5%. Policymakers, including President Lagarde, are concerned about the side effects of lower interest rates, such as declining bank profit margins and rising house prices. The money market predicts that the European Central Bank will cut interest rates by 10 basis points at next week's policy meeting and another 10 basis points later this year. Central bank officials said they may take targeted measures, such as increasing long-term bank loans instead of cutting interest rates, which will help provide direct credit to businesses affected by the outbreak. The euro's exchange rate against the dollar surged after the Fed took action. If this rally continues, it will not be good news for the eurozone, which is heavily dependent on exports. Although the European Central Bank has not set exchange rate targets, it has repeatedly warned in policy statements that exchange rate fluctuations are a source of uncertainty and need to be monitored. Valentin Marinov, head of exchange rate research at Credit Agricole Group of 10 (G-10), said that if the European Central Bank wants to catch up with the Federal Reserve's rate cut, the appreciation of the euro is a small price

Bank of England Governor Carney will leave the Bank of England this month. He said on Tuesday that the exact form and timing of measures taken by countries around the world will vary, but they will respond quickly and effectively. He said in January that the Bank of England had enough room to double the size of its £ 60 billion asset purchase plan in August 2016, which is equivalent to cutting interest rates by about 100 basis points. In addition, adopting forward-looking guidelines or explanations on how central banks respond to economic changes will also increase ammunition in this area. Andrew Bailey, who will take over as governor of the Bank of England on March 16, will speak in Parliament on Wednesday or provide more clues on the future of policy. Due to the negative interest rate of -0.10% and the side effects of negative interest rates, the Bank of Japan has limited policy space. Unlike the Federal Reserve, despite speculation that the Japanese economy is in recession again, the Bank of Japan has not recently hinted that it will stimulate the economy further. Instead, the bank emphasized measures aimed at ensuring market stability, such as buying exchange-traded funds and using special bond operations. The Bank of Japan may formally raise its ETF purchase target to indicate that it is taking action, or the Bank of Japan may say that it will buy assets at a faster rate during the virus outbreak but will not change the overall asset purchase target. On a smaller scale, Japan may have a loan plan for businesses affected by the outbreak. If economic risks persist, the Bank of Japan may strengthen its communication with the outside world to show a more lenient preference, or mention the risks posed by the virus in the wording of the statement. Finally, if other central banks lower interest rates, the yen strengthens, or the Japanese economy collapses, the Bank of Japan may have to join the rate cut. However, during the 2008 global financial crisis, Japan did not participate in a coordinated rate cut. Bank of Canada Bank of Canada will announce a rate decision today. Currently, the overnight loan interest rate remains at 1. 75%. Most economists expect the Bank of Canada to cut interest rates by 25 basis points on Wednesday to deal with the impact of the coronavirus outbreak on financial markets and the global economy. Both Royal Bank of Canada and Imperial Bank of Canada expect Bank of Canada to cut interest rates by 25 basis points on Wednesday and then cut them again in April. Bank of America said that as the risk of a downturn rises, the Bank of Canada has once again shown a loosening trend. Although the strong performance of the job market makes the possibility of a rate cut in March very low, the deterioration of future data may increase the risk of rate cuts in subsequent meetings. At the same time, the continued decline in energy prices will also force the Bank of Canada to consider cutting interest rates. Dutch International Group predicts that the Bank of Canada will cut interest rates by 25 basis points. As the Bank of Canada has more room to support the economy and financial markets than most central banks, as public health security risks worsen, the Bank may cut interest rates by another 50 basis points in the coming months. Will the People's Bank of China follow up after the People ’s Bank of China ’s Federal Reserve has cut interest rates by 50 basis points? On this topic, the industry is currently quite controversial. CITIC clearly believes that for domestic monetary policy, the Fed unexpectedly cut interest rates in response to the impact of the epidemic, further opening up domestic monetary policy space, and the domestic central bank may continue to cut interest rates in March. At the same time, this morning's open market operation deserves high attention. Considering the abrupt rate cuts and referring to the experience of global central banks in stabilizing markets in 2008, domestic central banks may also choose to follow up in a timely manner. Overall, interest rates will enter a new downward phase in March, with a target yield range of 2.4% -2.6% for 10-year government bonds. However, Wu Chaoming, chief economist of Fortune Securities, said that the possibility of the People's Bank of China after a rate cut in March is very low. Concerned about the impact of the new round of pneumonia epidemic on the US real economy, the Fed lowered interest rates before the meeting on the 18th of this month, exceeding market expectations. On March 2, the Organization for Economic Cooperation and Development (OECD) in its latest mid-term assessment report lowered the U.S. economic growth rate this year by 0.1 percentage point to 1.9%, a decrease of 0.4 percentage point from 2019

Therefore, the Fed's rate cut will help boost market confidence in the economic growth of the world's largest economy. Coupled with the recent interest rate cuts taken by other central banks around the world, this will help restore overall confidence in the global market, help stabilize asset prices and financial risks, and of course it will also benefit domestic a-shares. As for whether the domestic central bank will follow interest rate cuts, Wu Chaoming believes that the possibility is very short-term. In the early days, the central bank introduced many policies and measures on liquidity supply and interest rate cuts in response to the impact of the epidemic. What needs to be done now is to implement the policies and observe the effects of the policies. After the data is released in March, the People's Bank of China will assess whether this year's overall goals can be achieved and decide whether to cut interest rates. Therefore, the possibility of a rate cut in March is very low, unless there are special circumstances.