The Impact of the Federal Reserve’s Interest Rate Cuts on the China’s Financial Development

Abstract

The article investigates the impact of the Federal Reserve’s interest rate cut in September 2024 on China’s financial development, especially policy adjustment in the context of slowing economic growth. The article primarily employs such methods as historical data analysis, policy analysis, capital flow analysis, and exchange rate impact analysis. The paper investigates the impact of the Fed’s interest rate cut on RMB exchange rate, capital flows and foreign exchange reserves, and also analyses the specific impact on China’s stock market and foreign exchange market. By using historical and financial market data in 2024, the direct impact of the interest rate cut on the stock market and exchange rate is assessed, and the risks caused by increased capital liquidity are discussed. The paper concludes that interest rate cuts can attract capital inflows and push up asset prices in the short term, but they also increase market volatility. The RMB exchange rate has been facing upward pressure, and foreign exchange reserve management has encountered challenges. China should strengthen financial market risk management and maintain the flexibility of monetary policy and exchange rate management to cope with the new opportunities and challenges caused by global monetary policy changes and ensure economic and financial stability.