Today's biggest financial news is undoubtedly the Federal Reserve's decision to cut interest rates by 50 basis points to a range of 4.75%-5%.

The Fed's rate decision not only affects the trajectory of the US economy but also has a spillover effect that impacts the global economy.

The most significant concern domestically is how the Fed's initiation of this round of rate cuts will affect China's economy.

The Federal Reserve decided to lower the target range of its widely influential federal funds rate at its September meeting.

Changes in the Fed's interest rates can affect the cost of loan products such as mortgages, as well as the value of cash, bonds, and stocks.

The Fed's decision to end its recent cycle of economic tightening is expected to have a global impact.

According to IMF data, the global annual inflation rate is expected to be 5.9% by August 2024.

The organization also reported that the average inflation rate in developed economies like the United States is close to 2.6%.

The Fed's decision to cut rates came after several months of unstable labor market data in the United States.

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The unemployment rate in August 2024 was 4.2%, with 7.1 million Americans out of work, which is not much different from recent months.

However, the employment situation has significantly deteriorated compared to a year ago when the unemployment rate was 3.8%, and 6.3 million Americans were looking for work.

Central banks of various developed economies have raised interest rates to combat global inflation.

Economists point out that tightening cross-border conditions simultaneously could exacerbate their impact.

The European Central Bank also lowered its policy rate twice in 2024.

According to IMF data, the global GDP growth rate is expected to be 3.2% in 2024 and 3.3% in 2025.

Many misjudgments have been made regarding the Fed's rate cut.

Many domestic third-party institutions and experts have provided interpretations and analyses in the first instance.

Looking at all the viewpoints and conclusions, there are roughly the following aspects: First, the Fed's rate cut opens up space for China's regulatory policies; Second, the Fed's rate cut will drive international capital back to China; Third, the Fed's rate cut supports the yuan exchange rate.

The above three viewpoints and conclusions are currently the more mainstream ones regarding the "impact of the Fed's rate cut on China's economy."

Of course, there are also many institutions and experts who have not expressed their views on this issue; they have only commented on the Fed's rate cut event without discussing the spillover effect.

However, if these three viewpoints and conclusions are carefully examined, many loopholes and logical problems can be found.

For the first point, the People's Bank of China has its own rhythm in regulatory policies and does not follow the Fed's policies.

Whether in the past decade or now, only the central banks of European and American countries and Western countries such as Japan, Australia, and Canada will closely follow the Fed's pace.

The People's Bank of China has always had its own regulatory ideas.

Moreover, the regulatory policy space of the People's Bank of China does not depend on Fed policy.

The size of the central bank's policy space mainly depends on the official determination and social tolerance.

For the second point, the mainstream trend of international capital is to embrace US dollar assets.

The biggest reason is determined by the Fed's high interest rate level.

For example, the most popular operation mode of international capital before was to borrow low-interest yen to invest in high-interest US dollars, thereby achieving policy arbitrage.

However, this operation is no longer applicable with the crackdown from the Japanese side and the Fed's rate cut.

However, even if policy arbitrage is not possible, it does not mean that international capital will flow into China.

Because capital is profit-seeking, where the capital flows is the core issue of where there is interest.

And the current international capital's concerns about the Chinese market have not been eliminated.

This can be seen from the primary market.

Since the pandemic, US dollar funds have faced redemption pressure from LPs.

A large number of LPs have asked institutions to quickly cash out the projects they hold to ensure the flow of funds.

And this situation has continued to this day.

Although there are still some overseas LPs willing to invest in Chinese funds, it is far from the prosperity before the pandemic.

It is clear that market confidence has not been restored.

Therefore, whether the Fed cuts interest rates or how much it cuts, it does not mean that international capital will flow into China.

For the third point, with the People's Bank of China's initiation of counter-cyclical regulatory factors, the yuan exchange rate has its own independent trend.

The impact of exchange rate changes caused by the Fed's interest rate policy changes has been very small.

At this stage, as long as the People's Bank of China has not completely withdrawn the counter-cyclical regulatory factors, the main factors of the yuan exchange rate changes are administrative forces rather than market forces.

The overlooked tone of the Fed's monetary policy is that because the Fed has started this round of rate cuts, too many people subconsciously believe that the Fed's monetary policy has turned to ease.

But in fact, this is not the case.

Many people did not pay attention to the content of Fed Chairman Powell's press conference after the rate decision.

The most important part of Powell's speech at this press conference was "We do not intend to stop the reduction of the balance sheet because of this rate cut.

These two can be carried out at the same time, and in a sense, they are both a form of normalization.

So, you can see that the balance sheet is being reduced while the rate is being cut."

The information released by this speech is very important, but it has not attracted much attention.

According to Powell's speech, the Fed will continue to shrink the balance sheet (reduce the balance sheet) in the future.

This means that the Fed will continue to deleverage.

Powell also emphasized that the reduction of the balance sheet and the rate cut are "carried out at the same time."

This indicates that the Fed's monetary policy has not truly turned to ease.

This can also be reflected in the market response.

After the Fed cut interest rates: the S&P 500 index closed down 16.32 points, down 0.29%, at 5,618.26 points; the Dow Jones Industrial Average closed down 103.08 points, down 0.25%, at 41,503.10 points; the Nasdaq Composite Index (Nasdaq) closed down 54.76 points, down 0.31%, at 17,573.30 points; the Nasdaq 100 index closed down 87.90 points, down 0.45%, at 19,344.49 points; after the Fed announced a 50 basis point rate cut, gold prices soared, and after the start of Fed Chairman Powell's press conference, it rose to a historical high of 2,600.16 US dollars, then sharply gave up the gains and turned to decline, refreshing the daily low to 2,546.98 US dollars.

Obviously, capital is very clear that the Fed's rate cut does not mean that the Fed's monetary policy has turned to ease.

In summary, the Fed's rate cut has caused so many people in China to be excited, and everyone hopes that the Fed's rate cut can have a greater impact on China's economy, but the final result may just be a ripple.