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Analysis | China interest rate cuts further widen US policy gap, with all eyes on next Fed move at Jackson Hole
- China’s central bank on Monday cut both the one-year and five-year loan prime rates, continuing its policy divergence from the US Federal Reserve
- US Federal Reserve Chair Jerome Powell will address the annual economic symposium in Jackson Hole to offer clues about the central bank’s next moves
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China’s latest interest rate cuts have further widened the policy gap between Beijing’s approach and that of the US Federal Reserve, which may further challenge efforts to stabilise the world’s second-largest economy.
The move on Monday by the People’s Bank of China (PBOC) to lower both the one-year and five-year loan prime rates (LPR) also increases the attention on a key US policy meeting set to take place at the end of this week.
The annual central bank symposium in Jackson Hole, Wyoming, begins on Friday with a speech from US Federal Reserve Chair Jerome Powell set to be closely watched for clues about the central bank’s next moves.
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“The Fed is unlikely to significantly slow the pace of rake hikes because employment is strong and inflation worries remain high,” said Raymond Yeung, chief Greater China economist with ANZ.
Further rate cuts may result in widening interest rate differentials between China and other major economics, especially the US
The US Federal Reserve has already rolled out a cumulative 225 basis points worth of interest rate increases since March, with more expected as the US battles an inflation rate that recently surpassed 9 per cent.
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