China's Central Bank Cuts Short-Term Policy Rate, Injects Liqudity

China's Central Bank Cuts Short-Term Policy Rate, Injects Liqudity By Hardika Singh

The big news this morning comes out of China, where the central bank said it has trimmed one of its short-term policy rates and pumped about $10.6 billion of liquidity into the financial system.

China's economic troubles are deepening, with one economist warning clients the country is headed for a recession-and could need a U.S.-style bank bailout, Reshma Kapadia writes for Barron's.

"We have never been more worried about China growth," TS Lombard chief economist Freya Beamish told Barron's.

Beamish and her colleague, Rory Green, who heads China research, see China's growth sputtering and more pain ahead in the first half of next year. Among the most troubling developments in leading indicators is the decline in money supply, or M1, which had previously been growing double-digits. The declines are another tell that China's stimulus attempts, such as rate cuts, aren't hacking it.

Looking at the week ahead, after the Federal Reserve's large 50 basis-point interest-rate cut, attention switches back to economic data-particularly PCE inflation figures-for indications on how fast rates will fall from here.

In Europe, provisional purchasing managers' data for the eurozone and the U.K. will attract attention, alongside a rate decision in Switzerland.

In Asia, the spotlight is on the Reserve Bank of Australia as it meets ahead of key inflation data. Other events include an inflation print in Japan and industrial profit data for China.

Top News China's Central Bank Announces Rate Cut, Injects Liquidity

China's central bank has lowered a short-term policy rate and pumped more liquidity into the financial system, as it continues efforts to help boost the economy.

The People's Bank of China cut the 14-day reverse repurchase interest rate by 10 basis points to 1.85%, and injected 74.5 billion yuan, equivalent to $10.6 billion, of liquidity via the policy tool, it said on its website on Monday.

The central bank also injected 160.1 billion yuan through 7-day reverse repo agreements, keeping the interest rate unchanged at 1.7%, it said Monday.

Economists anticipate the Chinese central bank will lower its 7-day reverse repo rate-now seen as the key rate for pricing benchmark lending rates-in the coming months, as the Federal Reserve's rate cut gives it more room for monetary policy easing.

China's financial regulators, including its top central banker, will hold an ad-hoc press briefing on Tuesday, fueling expectations that Beijing could announce big-ticket stimulus measures to boost its ailing economy. Pro Take: The Temp Job Slump Deepens

By Bob Fernandez

Temporary worker hiring has steadily declined since the Fed began hiking interest rates in early 2022, a warning sign for the labor market that has often preceded a recession. It's simple: Companies hire more temps when they anticipate growth or need to temporarily fill the shoes of departing employees. They don't hire temps when they anticipate slower economic times. Read more .

U.S. Economy Here's What Happens to Markets When Interest Rates Fall, in Charts

The Federal Reserve's big interest-rate cut last week is rippling through markets. With additional cuts expected in the months ahead, investors are looking to history to gauge what's next .

The Rate Cut Happened. Not All Borrowing Costs Are Going Down.

The Fed is finally cutting interest rates. One key gauge of borrowing costs has been going up anyway . Yields on longer-term Treasurys have ticked higher since the Fed approved a 0.5 percentage point rate-cut last week.

The Rate Cut Won't Save These Real-Estate Owners

Commercial-real-estate owners are cheering as interest rates finally start to fall. Yet relief is coming too late for many highly indebted property investors like the owners of 145 South Wells, an office tower in downtown Chicago.

America's Ambitious Climate Plan Is Faltering

Climate optimism is fading. Higher costs, pushback from businesses and consumers, and the slow rollout of technology are delaying the transition from fossil fuels .

Financial Regulation Germany to Keep Commerzbank Shares After UniCredit Takes Stake

Germany's government decided to keep its stake in Commerzbank until further notice, after a sale of a portion of its shares to Italy's UniCredit sparked speculation about a potential takeover.

South Korea Can Go Only So Far Copying Japan's Market Reforms

South Korea is taking a page from Japan to boost its stock market . There are certainly some low-hanging fruits to pick, but the country's large family-controlled corporate empires, known as chaebols, could be an obstacle to more meaningful structural change.

Forward Guidance Monday (all times ET)

8 a.m.: Fed Bank of Atlanta President Raphael Bostic speaks at European Economics and Financial Centre event

9:45 a.m.: US Flash Manufacturing PMI

9:45 a.m.: US Flash Services PMI

1 p.m.: Fed Bank of Minneapolis President Neel Kashkari participates in Greater Kansas City Chamber of Commerce event

2 p.m.: IMF Managing Director Kristalina Georgieva attends Washington Post virtual climate summit

Tuesday

9 a.m.: U.S. monthly house price index

10 a.m.: S&P CoreLogic Case-Shiller Indices

10 a.m.: Richmond Fed Business Activity Survey

10 a.m.: Consumer confidence index

Research Fed's Waller Sees More Rate Cuts, Inflation Below 2%, and a Strong Economy Ahead

Fed Governor Christopher Waller just shed some light on the central bank's down-to-the-finish-line deliberations over the size of this week's interest-rate cut. Recent declining inflation, rather than economic or labor-market weakness, drove him to support a larger rate decrease to kick off the Fed's rate-cutting cycle, Nicholas Jasinski writes for Barron's.

"We're at a point where the economy is strong, inflation is coming down, and we want to keep it that way," Waller said during an interview with CNBC on Friday.

Waller has served on the Fed's board of governors since December 2020 and is a voting member of its policymaking body, the Federal Open Market Committee. The FOMC voted last Wednesday to lower the federal-funds rate target by a half percentage point, to a range of 4.75% to 5%, after holding rates steady since July 2023.

Waller explained his inclination for a half-point decrease by pointing to a faster softening in inflation since the spring.

Commentary The Fed Is Flying Blind. Investors Don't Seem to Care.

You can spend a lot of time on Fed kremlinology, analyzing policymaker statements and forecasts. Or you can ignore what they say, and just look at what they do -as markets decided after the Fed's supersize rate cut last week, writes The Wall Street Journal's James Mackintosh.

Sorry, the Fed Can't Save Us From a Bear Market

Wall Street commentary around this week's Fed rate cut could have filled a very long and boring book, but much of what you need to know about its effect on the stock market can be found in a movie rarely linked with monetary policy : "The Wizard of Oz," writes WSJ's Spencer Jakab.

Basis Points Already, more job seekers are robo-filing hundreds of applications online, flooding recruiters with responses that make it hard to responsibly screen all candidates. Canadian retail sales in July were stronger than expected and the flash estimate for August suggests a rise for the month, which implies volumes grew again. The eurozone economy contracted as the third quarter drew to a close , while inflationary pressures cooled, according to a series of business surveys released Monday. A surge in wind and solar power means many firms and consumers around Europe can get paid for plugging in . The U.S. could be next. Having fallen far behind China in shipbuilding, the U.S. is turning to allies in South Korea and Japan for the turnaround strategy. About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

September 23, 2024 07:16 ET (11:16 GMT)

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