The US Federal Reserve announced a 25-basis point interest rate cut, but US stocks still fell more than 1% after the announcement. Market participants believe that the current price has already reflected that the Fed will cut interest rates again later this year. Norman Chan, Chief Executive of the HKMA, said that the US interest rate cuts and early contraction show that the US monetary policy may start to turn. In the short term, it is beneficial to the US economy and asset market, but the medium- and long-term impact on the economy and inflation is still largely uncertain.

Chairman of the Fed, Jerome Powell, said that Fed will continue to pay attention to the performance of future economic data and support the economy when necessary. He also said that this interest rate cut is a medium-term policy adjustment, and does not signal a new round of longer interest rate cuts cycle. A looser monetary policy is now adopted as an adjustment. Apart from interest rate cuts this time, the Fed also announced that it will end the reduction of its USD 3.8 trillion portfolio from August 1, two months earlier than expected.

US President Trump, who has been dissatisfied with Powell’s delay in interest rate cuts, said on a social networking site that “As always, Powell disappointed me, but we will win anyway, but I will certainly not get help from the Fed. "

In Hong Kong, Norman Chan said that the current global economic and financial environment is affected by many risk factors. It is difficult to assess the impact of further easing policy in the United States. As the Hong Kong dollar interest rate continues to be affected by the supply and demand of Hong Kong dollar funds in the local market, it may not immediately follow the rate cut of the United States. In June, the Hong Kong dollar and US dollar deposits remained stable. There was no obvious indication that funds were flowing out of the Hong Kong dollar or the banking system. The impact of the recent large-scale IPO activities and corporate dividends increased the demand for Hong Kong dollars, which strengthened slightly.