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Global interest rate divergence! The US is cutting, Japan is raising, and China is staying put. The underlying logic hides a new direction for capital 一起聊聊呗！
The three major economies are staging a 'rate war': The Federal Reserve has cut rates three times this year for a total of 75 basis points, bringing rates down to 3.5%-3.75%; Japan has raised rates to 0.75%, a 30-year high; China's LPR has remained unchanged for seven months, with one-year at 3.0% and five-year at 3.5% holding the line. Although the operations seem divergent, they are essentially the necessary choices of the three central banks in response to their respective 'economic challenges'.
The US's dilemma is hidden in the data: November CPI at 2.7% is still above the 2% target, while the unemployment rate has risen to 4.6%. The Fed's 'hawkish rate cuts' aim to prevent economic stall while fearing inflation rebound, with the 3.5%-3.75% rate range becoming a window for observation, maintaining the attractiveness of dollar assets while alleviating employment pressure.
Japan is bidding farewell to the 'deflationary curse': Core inflation has exceeded 2% for 44 consecutive months, a weak yen has pushed up import costs, and rate hikes are meant to lock in a virtuous cycle of inflation and wage increases. However, a debt ratio of 260% prevents aggressive moves, forcing a slow march towards normalization of monetary policy, balancing between anti-inflation and fiscal protection.
China's 'staying put' is a precise balance: Inflation is only 0.7%, rates are already low, but confidence among residents and enterprises is weak. Simply cutting rates could exacerbate bank margin pressure and exchange rate fluctuations. The policy focus has shifted to structural tools, with targeted support for technology and affordable housing sectors, relying on fiscal and industrial policy to underpin the economy.
This interest rate divergence has triggered a global capital reallocation: In a weak dollar environment, the attractiveness of RMB assets has increased, yen carry trades are being restructured, and the volatility of risk assets like cryptocurrencies has intensified. Where do you think capital will flow next? Will the rate divergence last until 2026? Musk concept little dog 🐶 p.up.pi.es
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