After much anticipation,the Federal Reserve has finally made a decision,cutting interest rates by 50 basis points.

This can be considered a day of global celebration as it marks the first rate cut by the Fed in five years.

However,amidst our joy,there might be some anxiety.

The magnitude of this rate cut has exceeded the expectations of one-third of the market.

Let's discuss what this 50 basis point rate cut means for the US economy and what opportunities and challenges it presents for China.

Is it beneficial or detrimental?

Now,the Fed has lowered the target range for the federal funds rate by 50 basis points,bringing it to between 4.75% and 5%.

Previously,there was a divergence in market predictions,with a 65% chance of a 50 basis point cut and a 35% chance of a 25 basis point cut.

However,the outcome aligns with the general public's expectations.

So,what does a significant 50 basis point rate cut mean for the US economy?

First,it implies that the US economy has entered a recessionary cycle.

The market sentiment towards this rate cut is quite contradictory; everyone wants the dollar to cut rates significantly to release liquidity and drive global economic growth,while also wanting the US economy to remain robust.

But one cannot have their cake and eat it too.

A substantial rate cut indicates that the US is administering a heavy dose to save the market,signaling that the economy is in a recessionary cycle.

Barring any surprises,the dollar is expected to cut rates significantly more.

The market is now predicting that the dollar will cut rates by more than 100 basis points before the end of the year.

This further implies that the risk of a hard landing for the US economy has increased,and the global economy still faces many uncertainties.

Secondly,this means that the US debt will reach new highs.

The US debt has already surpassed $35 trillion,and if the dollar cuts rates significantly,it will further inflate the price of US debt assets.

Consequently,the US will have to repay its substantial foreign debt with more dollars.

Additionally,a devalued dollar will lead to higher prices for imported goods,increasing the US trade deficit and exacerbating the US debt problem.

It can be said that a minor rate cut is beneficial for the US economic recovery,but a significant rate cut will only further increase the risk of a debt crisis.

Furthermore,this also implies that the US will halt its pace of wealth extraction from other countries.

A rate cut in the dollar will relatively appreciate other countries' currencies.

It can be said that all major global currencies will benefit.

At this time,a significant amount of capital will flow from the US to the rest of the world,and the US's aggressive pace of wealth extraction will automatically halt.

This is the reason for the global celebration.

Because a rate cut in the dollar not only reduces the foreign debt of other countries but also drives a significant amount of capital backflow,promoting domestic economic development.

However,the US's own issues have not been resolved,and this hasty conclusion can only be seen as a temporary halt to wealth extraction.

Because the US will not give up,and there may be an even bigger scythe waiting for us later.

This is why everyone is anxious amidst their joy.

Next,let's discuss what opportunities and challenges a 50 basis point rate cut presents for China.

First,this implies that the first half of the Sino-US competition has ended,and we can take a breather.

After enduring for so long,it turns out that the US could not hold on any longer.

If the dollar did not cut rates,the US economy would collapse completely.

In this situation,as the global market demand is released,China,being the world's largest manufacturing country,will definitely benefit from increased foreign trade exports.

Additionally,a significant amount of capital will enter the Chinese market,driving corporate investment and employment.

In short,making money will become relatively easier for us.

At this time,China's domestic demand will also be fully activated.

It can be said that the end of the first half of the Sino-US competition is also a joyous event for our people.

Secondly,China will have more monetary policy space to promote domestic economic development.

Although China has been adopting opposite monetary policies from the US in recent years,the loan interest rate has been reduced to 1.88%,indicating that China is promoting domestic demand under great pressure.

But now,with the dollar finally cutting rates significantly,this has released some pressure for China to further adopt loose monetary policies.

Because even if the yuan cuts rates further,it can withstand the dollar exchange rate and not worry about capital flight.

Of course,if the yuan interest rate is further reduced,it will definitely be a good thing for our people.

Because the cost of our car loans and mortgages will be reduced,and the cost of corporate financing will also be reduced.

Furthermore,it will also promote the internationalization of the yuan.

It can be said that in recent years,even though the dollar has been strong and the yuan has been continuously cutting rates,the exchange rate of the yuan against the dollar has been very strong.

This is of course due to the strong economic foundation of China,its huge industrial chain advantages,and the huge release of domestic demand.

Now that the dollar has finally cut rates significantly,and will cut rates further,this will certainly push up the value of the yuan,making the yuan the most noteworthy currency in the world,thereby driving more global investors to invest in the yuan.

In addition,as the dollar weakens and the yuan strengthens,this will also promote more countries around the world to use the yuan for trade settlement.

Because the yuan's exchange rate is more stable!

Now the yuan maintains the position of the world's fourth most active currency,with a transaction share as high as 4.74%.

At that time,it will further increase the international settlement share of the yuan,and China's global influence will be further strengthened.

On the downside,the volume of capital inflows will be discounted.

Because as the dollar cuts rates significantly,other countries may have already been waiting impatiently,and will now start a cycle of rate cuts.

At this time,the dollar may still be very strong globally,and the volume of capital flowing back to other countries will be discounted,and of course,China is no exception.

This will have a certain impact on the recovery of the global economy and the effectiveness of China's domestic and international economic cycles.

Secondly,the US may prevent capital from entering the Chinese market.

With the US economy in recession and China's economy rising,do you think the US will give up?

The US has previously threatened to restrict capital from entering the Chinese market and to prevent Chinese capital from investing in the US.

It can be said that the country the US is most envious of now is China.

So,even if the US economy is in recession,the US will try every means to ensure that China does not get any benefits.

Furthermore,the US may further increase trade sanctions!

For example,by imposing higher tariffs on our country to restrict the export of our goods.

Because Trump has previously threatened to impose high tariffs on all of our goods!

We don't care whether Trump will take office or not,at least this also represents a voice in the US.

So,as the dollar cuts rates by 50 basis points,while the world is celebrating,everyone is more worried about the US economy falling into a sharp recession.

For China,the first half of the Sino-US competition has ended,but the second half has just begun,and we still face many challenges and cannot be complacent.