On September 19, Caixin (Editor Xiaoxiang) reported that although the Federal Reserve is not the first to "eat crab" (lower interest rates) in this round of global central bank interest rate cuts, with the largest influence on global monetary policy trends, the central bank directly lowered interest rates by 50 basis points in one go, the "marathon" of global interest rate cuts is likely to accelerate...

Many industry insiders believe that with the Federal Reserve announcing a significant interest rate cut last night, it is undoubtedly a positive signal for non-US central banks that are currently concerned about their domestic economic growth.

After the Federal Reserve announced the interest rate cut, several central banks that are directly linked or closely follow the Federal Reserve have adjusted their benchmark interest rates one after another. These include:

Kuwaiti central bank lowered the interest rate by 25 basis points to 4%.

The Central Bank of Bahrain lowered the overnight deposit rate by 50 basis points to 5.50%.

The Central Bank of the United Arab Emirates lowered the overnight deposit rate by 50 basis points to 4.90%.

The Qatari central bank lowered the deposit rate by 55 basis points to 5.2%, the repo rate by 55 basis points to 5.45%, and the loan rate by 55 basis points to 5.70%.

The Hong Kong Monetary Authority also announced on Thursday that it will cut the benchmark interest rate by 50 basis points to 5.25%, effective immediately.

In the past few months, although some major central banks including the eurozone, the United Kingdom, and Canada have started cutting interest rates ahead of the Federal Reserve, even some of these central banks have cut rates 2-3 times, they have not actually opened up a gap with the Federal Reserve - compared to the more common 25 basis points rate cuts by central banks around the world, the Fed has directly cut rates by 50 basis points at once, which is equivalent to instantly narrowing the gap compared to central banks such as the European Central Bank that have already cut rates twice.

Although the central banks of other countries, including India, South Korea, and South Africa, have remained unchanged, the Federal Reserve's latest easing measures are clearly likely to encourage these countries to "take the first step" courageously.

More central banks are expected to join the rate cut camp.

Analysts say that for many central banks, "jumping the gun" on rate cuts before the Federal Reserve could lead to the risk of currency depreciation - when their interest rates are relatively lower than those of the United States, their currencies are easily targeted by bears. The depreciation of their currency, in turn, easily pushes up the prices of imported goods, leading to a new round of inflationary pressure.

South Africa belongs to this camp. With the Fed's rate cut in place, the South African Reserve Bank may become the next country to lower borrowing costs, with its interest rate meeting scheduled for Thursday.

Jason Tuvey, an economist at Capital Economics, said that the Federal Reserve seems to be starting a series of rate cuts, which will make officials from other central banks feel relieved, so that at least their own actions will not cause another decline in their currency.

Among the non-US central banks that have not yet lowered borrowing costs, many are located in Asia, where the rise in inflation rates has been lower than in other parts of the world, leading to smaller tightening measures by central banks in the region. With the slowdown in CPI growth and the potential alleviation of currency depreciation risks after the rate cut by the Federal Reserve, these central banks are bound to have more impetus to join the rate-cutting camp.

According to economists at JPMorgan, the Reserve Bank of India is expected to lower interest rates next month, and the central banks of South Korea and Thailand may also take action before the end of the year.

Earlier this Wednesday, the central bank of Indonesia unexpectedly announced a 25 basis point reduction in its benchmark interest rate to 6%, as it was anticipated that the Federal Reserve would take interest rate cuts. This is the first rate cut by the central bank of Indonesia since February 2021. The central bank of Indonesia pointed out that investors now expect the pace of interest rate cuts by the Federal Reserve to be faster than earlier this year, which should support the Indonesian rupiah.

"These developments have further reduced the uncertainty in the global financial markets, and inflows of overseas capital, including to developing countries such as Indonesia, are expected to increase," the central bank of Indonesia said.

For central banks in Latin America and some other countries that have already initiated interest rate cuts, the latest moves by the Fed will also eliminate some of the risks they face. Bank of America economists wrote in a recent report to clients, "Most central banks are probably celebrating the series of rate cuts that the Fed is about to make."

Editor/Lambor