The US Federal Reserve’s dovish monetary stance and its hint of three interest rate cuts in 2024 may bring some relief to Chinese businesses and the yuan, said analysts and academics, who urged for Beijing to focus on stronger domestic policy to sustain an economic recovery.
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With inflation easing, the US Federal Reserve unanimously voted on Wednesday to keep its benchmark overnight borrowing rate steady at between 5.25 and 5.5 per cent, although chair Jerome Powell said incremental cuts could begin to “come into view.”
Li Daxiao, chief economist at the Shenzhen-based Yingda Securities, said the monetary policies of China and the US may become more aligned in 2024.
“Without the overhanging concern of a strengthening US dollar, it will help the Chinese economy and we will have a better external environment,” said Li.
“The outflow of capital could be slowed, or even reversed, and the interest spread between the two countries can be dramatically narrowed. The yuan, once pummelled, will regain much of the lost ground.”
