This is the first time that the Bank of Korea lowered the benchmark interest rate after three years.
At the meeting of the Financial and Monetary Committee of the Bank of Korea on July 18, Lee Zhulie, governor of the Bank of Korea, said that the economic growth and price trend of South Korea were weaker than expected, and the export and investment situation in the first half of the year was not as good as expected. The Finance and Monetary Committee predicts that South Korea's economic growth will slow down.
In order to boost the economy, the Bank of Korea decided to cut the benchmark interest rate from 1.75% to 1.5%.
The Bank of Korea said that the main reason is that since the beginning of this month, the economic and trade frictions between South Korea and Japan have deepened the risks facing the Korean economy.
In addition, the global trade situation has also become a factor affecting the economic downturn in South Korea. Data show that in the first quarter of this year, the Korean economy contracted by 0.4% month-on-month.
On June 5438+08, many central banks, including South Korea, announced interest rate cuts. At the same time, Fed officials are still releasing loose signals, further suggesting a rate cut at the end of the month. What is the impact of interest rate cuts by multinational central banks on the market?
One of the key words in the global financial market recently is: cut interest rates! Cut interest rates! Cut interest rates!
With the Fed's interest rate cut almost certain at the end of the month, other central banks have taken the lead in preventing shocks.
On June 5438+08, the Bank of Korea announced that it would cut the benchmark interest rate by 25 basis points to 1.5%, which is the first time that the Bank of Korea has cut interest rates since September 20 16. Following the Bank of Korea, the Bank of Indonesia also announced that it would cut the seven-day reverse repo rate by 25 basis points to 5.75%.
Subsequently, the Bank of South Africa announced that it would cut the key interest rate by 25 basis points to 6.5%. Also on 18, the Ukrainian central bank also announced a rate cut, cutting the main interest rate by 50 basis points.
According to incomplete statistics, nearly 20 central banks around the world have taken interest rate reduction measures this year.
After Federal Reserve Chairman Powell issued congressional testimony to strengthen the expectation of interest rate cuts, the trend of interest rate cuts by global central banks was further highlighted. It can be said that a new wave of interest rate cuts by the central bank has started.
In the overnight market, Fed officials are still releasing loose signals. At present, the trading forecast of the US federal funds interest rate futures shows that the possibility of cutting interest rates by 50 basis points at the end of this month has greatly increased from 34% to 59%.
The global low interest rate environment is beneficial to some emerging market assets, and the stock market, bond market and currency in emerging markets are expected to usher in short-term benefits, but the longer-term performance still depends on the economic situation. At the same time, the risk of returning to easing should not be underestimated. Such as increased risk appetite, overheated lending and so on.
In this regard, the International Finance Association and the Bank for International Settlements have warned of the risks caused by excessive easing.
China, are you coming?
Interest rate reduction means that banks use interest rate adjustment to change cash flow. When banks cut interest rates, the income of funds deposited in banks will decrease, so cutting interest rates will lead to the outflow of funds from banks, and deposits will become investment or consumption, which will lead to increased liquidity of funds.
Generally speaking, cutting interest rates will bring more funds to the stock market, so it will help the stock price rise. The interest rate cut will stimulate the development of the real estate industry. Interest rate cuts will promote the expansion and reproduction of corporate loans, encourage consumers to buy bulk commodities with loans, and the economy will gradually heat up. From 20 14,165438+122, the benchmark interest rates for RMB loans and deposits of financial institutions will be lowered.