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🦧 no, rates aren't going up everywhere
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🦧 no, rates aren't going up everywhere

Ape of Omaha
Aug 16, 2022
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🦧 no, rates aren't going up everywhere
www.wiseape.fyi

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🇨🇳 surprise rate cut from china

 

while the us is struggling with a 8~9% inflation rate: in china, things are quite different at the moment

  • china’s july cpi turned out to be 2.7%, slightly lower than the 2.9% estimate

  • while this may feel like good news, it’s a sign and proof of weak demand in the chinese economy, as many worried

 

currently, the chinese economy is struggling with:

  • renewed (and still very strict) covid lockdowns that are leading the economy to lose steam

  • major property developers defaulting, leading to major liquidity crisis in the housing markets

  • to make things worse (and it doesn’t end here but i’ll stop), frustrated homebuyers are protesting by not paying their mortgages

 

so, on monday, the chinese central bank announced: short-term liquidity lending rates to be reduced from 2.1% to 2% and the one-year rate to be reduced from 2.85 to 2.75%

  • imo:

    • it’s no secret that overall demand’s been down in china for a while, and the continued lockdowns (more than covid itself) isn’t helping china either

    • it will be very hard to overcome the current environment with a minimal reduction in rates, although that still was surprising for the market, as pboc (chinese central bank) has been adamant in not reducing rates for a while

    • and, pboc won’t feel comfortable with a series of rate cuts, as that would make the renminbi even more unattractive relative to, say, the us dollar

      • for reference: the cny/usd currency pair is 6.3% year-to-date (1 renminbi could buy 0.1573 usd in january, not it can only buy 0.1474 usd)

 

hope today’s topic was interesting to y’all!

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as always, i am no financial advisor! (i am no substitute for professional financial services)
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🦧 no, rates aren't going up everywhere
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