China is in the forefront of this wave of easing - in early 2019, the People's Bank of China announced a reduction; on January 23, the Central Bank implemented the Targeted Medium-Term Lending Facility (TMLF), known as the "Targeted Interest Rate Reduction", whose operating interest rate is 15 basis points lower than that of the Medium-Term Lending Facility (MLF).
So, behind this global phenomenon, is the weakening of the economy the main reason? How will the potential "interest rate cuts" affect investment? Which assets will stand out in the "easing tide"?
The Asian-Pacific Central Bank has launched interest rate cuts one after another
The announcement of interest rate cuts by the new governor of the Central Bank of India at the first monetary policy meeting after taking office marked the first shot in the interest rate cuts in emerging markets during the Chinese Lunar New Year. At present, India's CPI growth rate has fallen to 2.2%, far below the medium-term target set by the Central Bank of India of 4%. Over the past six years, India's inflation rate has fallen from 10% annually to 3.6% last year.
Others argue that the Bank of India overestimated India's inflation rate and was too cautious in cutting interest rates earlier, which inhibited India's economic growth and became the core contradiction between the Bank of India and the government. Under pressure, the former governor of the Bank of India resigned in December last year, and interest rate cuts came on schedule after the new governor took office. It is worth mentioning that India still has a lot of room to cut interest rates in the future.
During the Spring Festival in China, global central banks downgraded their forecasts of economic growth and inflation, suggesting that global easing is coming. On February 8, the Federal Reserve of Australia not only lowered its inflation and economic growth expectations for 2020, but also hinted two days ago that the possibility of interest rate hikes and interest rate cuts would be more balanced than the previous emphasis on interest rate hikes to gain the upper hand.
"The slowdown in inflation is already a global phenomenon." Robertson told reporters that inflation in China has fallen to around 2.0% and PPI has fallen to a two-year low. In India, inflation has fallen below 4.0%, and the trend of rising inflation expectations last year due to rising oil prices and the devaluation of the Indian rupee has been reversed completely. In addition, the CPI of Indonesia is also stable at the bottom of the two-year interval. Inflation began to ease after raising interest rates by 175 BP in 2018 to offset currency weakness. Meanwhile, Robertson also expects Mexico's central bank to cut interest rates this year.
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