The Federal Reserve made its third interest rate cut of the year on December 10, 2025, with each cut being 25 basis points.
This is also the sixth interest rate cut since September 2024.
So what are the impacts of the Federal Reserve's interest rate cuts on various aspects between China and the United States?
🇺🇸 United States
➤Loan Interest Rates
Interest rate cuts lower borrowing costs for businesses and individuals, stimulate loan demand, and promote investment and consumption.
➤Savings Rate
The decline in deposit interest rates reduces the income of depositors, which may drive funds into the stock market and other high-yield assets.
➤Real Estate Market
Mortgage interest rates have decreased (for example, the 30-year fixed rate has dropped to 6.15%), leading to a rebound in home buying demand and a potential recovery in the real estate market.
➤Consumer Spending
Lower borrowing costs stimulate consumption, especially for low-income groups, and consumption demand is expected to rise.
➤Investment Market
Preventive interest rate cuts usually benefit US stocks (e.g., a higher probability of the S&P 500 index rising), but if a recession occurs, the effects are limited, bond yields may decrease, and gold may rise.
➤Exchange Rate Changes
The US dollar is expected to weaken in the short term, but may strengthen in the medium to long term due to the resilience of the US economy.
➤Job Market
Interest rate cuts aim to alleviate weakness in the job market (e.g., new job creation below expectations), supporting job creation, but the effects require time to verify.
➤Cost of Living
Interest rate cuts may trigger an inflation rebound, increasing cost of living pressures, making it difficult to alleviate the impacts of high prices in the short term.
🇨🇳China
➤Loan Interest Rates
The Federal Reserve's interest rate cuts provide leeway for China's central bank to implement loose policies, possibly lowering loan rates through reserve requirement cuts or interest rate reductions to stimulate the economy.
➤Savings Rate
Constrained by bank net interest margins, the downward space for deposit rates is limited, but it may slightly decrease with loose policies.
➤Real Estate Market
A loose funding environment and policy support may drive up housing prices, but factors like population decline and a large number of existing homes limit the upward space, requiring data observation.
➤Consumer Spending
Capital inflows and loose policies may stimulate consumption, but the weakness of the real economy limits the effects.
➤Investment Market
Interest rate cuts benefit A-shares and Hong Kong stocks, with capital inflows driving up asset prices, but long-term investment value is constrained by institutional and economic fundamentals.
➤Exchange Rate Changes
The RMB faces increased appreciation pressure in the short term, weakening export competitiveness, but depreciation pressure is alleviated, leading to intensified exchange rate fluctuations.
➤Job Market
Loose policies support economic growth and may indirectly promote employment, but global economic uncertainty may limit the effects.
➤Cost of Living
The appreciation of the RMB may lower the prices of imported goods, alleviating some cost of living pressures, but inflation risks must be monitored.
