Preface

"The US dollar cuts interest rates, the US loses!"

Almost everyone can think of this sentence at this moment. Faced with interest rate cuts, compared with the currencies of other countries, the US dollar interest rate is still relatively high. So, does a US dollar interest rate cut mean that the US has lost?

In fact, it is not the case.

Financial warfare is not as simple as fighting on the surface. The financial war between China and the US seems to have only one confrontation on the surface. In this confrontation, the interest rate of the US dollar has been reduced. Does this show the retreat of the US?

In fact, the financial war is far from over.

The Federal Reserve cuts interest rates and reduces the balance sheet.

The US media believes that this interest rate cut by the Federal Reserve may affect the global financial market and may lead to a situation similar to the collapse of the internet bubble in 2000. At this time, the US monetary policy will be responsible for this.

But in fact, the interest rate cut is just the "beginning", and there will be a large number of interest rate cuts in the future, just to maintain the stability of interest rates.

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If the Federal Reserve keeps the interest rate between 5.25% and 5.50% in the following September and November, without cutting or raising interest rates, it indicates that the US monetary policy may undergo an "interest rate cut".When the United States faces monetary tightening, it often focuses the main objectives of its monetary policy on interest rates, stabilizing within a certain range for an extended period, indicating that U.S. monetary policy is in a "rate-cutting" state.

However, if the Federal Reserve continuously lowers interest rates without pause, it indicates that U.S. monetary policy is in a "rate-raising" state. The emergence of this "rate-raising" state often occurs during times of favorable economic conditions and when inflationary pressures are increasing.

Nevertheless, it is typical to maintain a certain interest rate range for a longer duration, demonstrating that the U.S. financial policy is relatively prudent.

So, the Federal Reserve's rate cuts and balance sheet reduction are merely a form of monetary policy. At this time, rate cuts might lead to confusion—is this a strategy of the United States?

Since the U.S. rate cuts are aimed at allowing the U.S. dollar exchange rate to decline, should the People's Bank of China (PBOC) follow suit with rate cuts?

This would be beneficial for the appreciation of the renminbi.

However, this is not the case. China is not what the Federal Reserve assumes, so the rate cuts by the Federal Reserve have no relation to the PBOC.

When the Federal Reserve implements rate cuts, it often adopts more stringent measures, withdrawing a significant portion of liquidity.

The PBOC, on the other hand, does not do this, as it could impact the Chinese economy.

Therefore, the PBOC will not easily implement large-scale rate cuts, especially at this particular moment.There still exists an interest rate differential between China's current interest rates and the currencies of the five major developed countries in the United States. The financial war is still ongoing. If the US dollar cuts interest rates at this time, it may lead to the appreciation of the renminbi. If the renminbi appreciates, then our country's export trade will be affected. Therefore, the factors faced by our country's export trade are relatively complex. Similarly, China also closely monitors the US interest rate cuts. Because the US interest rate cuts will have an impact on our country's economy. But so far, our country's economy has been stable. So our country has not fully liberalized interest rates. The reason why the United States says "financial war" is because of the relevant policies formulated by the United States, after all, most international trade needs to use the US dollar. So the United States enhances the value of the US dollar through various means, resulting in our country's exports being affected. That's why it's called a "financial war" because the United States has this ability. Through this means to reverse trade, our country's exports are damaged. But from the current situation, our country's economy is stable, and export trade is also relatively stable. It is even continuously developing and getting better and better. From the cargo list shown by our country's export data, the proportion of machinery and equipment is still relatively high. This indicates that our country's production line is still very perfect, and the quality and quantity of products are maintained to a certain extent.From an economic perspective of the United States, it is in a relatively peak condition. Overall, the domestic consumption of goods in the United States is maintaining stability, sustaining a stable economic growth. Therefore, the interest rate cut in the United States is not aimed at repelling the economic development of our country.

The relationship of the "financial war" is complex.

From many aspects, the economic development of our country is still relatively good, mainly because the proportion of our country's exports is relatively low, and 50% of the population can purchase locally produced goods.

At the same time, our country's international trade also needs to use the US dollar, so our renminbi is also gradually appreciating in the competition with the US dollar.

The interest rate cut in the United States is also just to maintain the development of its own country's economy, and the interest rate cut is just to try to let more countries join, reaching a level comparable to our country.

But we also need to see the pros and cons of our country, and there are influences between countries.

The United States' balance sheet reduction and the interest rates of the US dollar are higher than those in our country, and even our country's basic interest rates are clearly lower.

Our country's financial policy is relatively prudent and will not easily cut interest rates.

Therefore, the "financial war" is not a zero-sum game between the two countries, but a win-win situation for both parties.

ConclusionThe United States' interest rate cut does not signify that the country has lost; it is merely a strategic move in monetary policy. Financial warfare has always been present, albeit in a latent form, manifesting as a state of offense and defense.