US cutting rates is a clear demonstration of Federal Reserve’s rising concern over its economic weakness

Source:Global Times Published: 2019/8/1 15:53:07

China's stock market dropped on Thursday, following the Wall Street decline overnight after the US central bank cut interest rates by 25 basic points for the first time since the Great Recession in 2008. 

The Shanghai Stock Composite Index dropped 0.81 percent on Thursday, the Shenzhen Component Index fell 0.63 percent, and the smaller ChiNext market index shed 0.5 percent.

"The US Federal Reserve resorting to cut interest rate implicitly demonstrates its  rising concern about the weakness in its economic growth ,"Dong Dengxin, director of the Financial Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Thursday. 

US GDP grew 2.1 percent in the April-June quarter, down from 3.1 percent growth in the first quarter this year.

The Federal Open Market Committee, the Fed's rate-setting body, trimmed the target for the federal funds rate by 25 basis points to a range of 2 percent to 2.25 percent after concluding its two-day policy meeting on Wednesday, according to Xinhua News Agency.

American manufacturing output has declined for two consecutive quarters, business fixed investment fell in the second quarter, and domestic inflation shortfall has continued, said Xinhua, citing Fed Chairman Jerome Powell.

The US Federal Reserve issued several rate increases throughout the previous year, and normally interest rate increases would be long term moves. The latest opposite measure shows that the US has no choice but to lower interest rates to ease its economic pressure, Dong said, and noted that the share markets in the US have expressed a pessimistic attitude toward the news.

The Dow Jones Index plunged 333 points, down 1.23 percent on Wednesday.

A decade's growth streak is approaching its end in the US, and a worse economic prospect may emerge in the future, Dong said.

As the world's largest economy, its downturn trend would surely impact global economic growth, including China, Dong said, adding that China is going through a hard time with its own economic structural upgrades which have been placing great pressure on development.

Dong Shaopeng, an adviser for the China Securities Regulatory Commission, told the Global Times in a recent interview that against the backdrop of the massive China-US trade war and an increasingly gloomy global economy, the most important thing for China to do is to firmly enhance its own development and to continue opening up to the world.


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