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Wednesday, March 4, 2020

Why was China not following the US in an emergency cut?

https://www.nasdaq.com/articles/chinas-central-bank-keeps-short-term-rates-steady-despite-fed-easing-2020-03-03

A monetary policy such as an interest rate cut is meant to resolve demand-side problems by boosting consumer spendings and business investments.  It is not meant to fix supply-side problems like supply disruption caused by an exogenous condition such as a virus outbreak.

This is the primary reason for China to stay put as it wants to monitor the work resumption situation first before taking any further stimulating policy.

Yes, the FED is wrong to do an inter-meeting emergency cut.

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