Fed cuts rates by 25 bps—impact on Chinese assets?

The Fed cut rates by 25 bps to 4.00–4.25%, its first cut since Dec 2024, citing weak U.S. job growth. Markets initially rose but later reversed, with the S&P 500 down, Nasdaq off 0.5%, and the Dow up 0.8%.

The US dollar index fell below its low point in early July to 96.22, hitting a new low since February 2022.

In addition, the median forecast of the Federal Reserve shows that it will cut interest rates by another 50 basis points in 2025.

The Fed’s rate cut increases money supply, lowers borrowing costs, and stimulates consumption and investment, supporting economic growth. It boosts stock market liquidity and risk appetite, while a weaker dollar lifts gold and oil prices.

The dollar index may face pressure, giving the RMB upward momentum.

With China’s countercyclical policies, the RMB is expected to stay stable without sharp appreciation or depreciation.