The Federal Reserve announced on the 18th local time that it will downgrade the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. This is the first interest rate cut by the Federal Reserve since March 2020, marking a shift from a tightening cycle of monetary policy to an easing cycle.

The global economy seeks future within uncertainty

The only trend that the global economy has exhibited in the past two years is the heightening uncertainty. Taking the United States as an instance: CPI fell to 2.6% in August, providing support for interest rate cuts; For another, employment in the United States has taken on weak trend, with an unemployment rate of over 4% in the past three months and an average of 116000 new jobs added per month, which is remarkably lower than previous levels, especially with 1.76 million layoffs in July. Federal Reserve Chairman Powell used the word 'cool' to describe the job market, demonstrating that the Fed has concentrated on employment. As illustrated by public opinion polls, despite the slowdown in inflation rates in recent months, the majority of voters are still deeply concerned about inflation and the cost of living. As exhibited by the latest Financial Times Michigan Ross poll found that four fifths of voters believe that rising prices are one of their biggest sources of financial pressure.

EU-side: As displayed in a report compiled by the European Commission, the gap in Gross Domestic Product (GDP) between the 27 EU member states and the United States has widened from slightly over 15% in 2002 to 30% in 2023, which is primarily attributed to a decline in productivity in Europe. Meanwhile, the report states that if Europe wants to effectively participate in international competition, it not only entails for more coordinated industrial policies and more efficient decision-making mechanisms, but also needs to invest an additional 800 billion euros (equivalent to 4.5% of the EU's GDP last year) annually to implement thorough reforms in high-tech and other fields to revitalize the economy.

In general, the transmission of economic development issues will indisputably impose certainly impact on the future trend of the global political landscape. With only 7 weeks left until election day, the Federal Reserve's interest rate cut has caught the attention of two presidential candidates in the United States: Democratic candidate Harris praised the move as a blessing for middle-class families, while Republican candidate Trump said the rate cut may be driven by political motives.

As reported by the Financial Times of the United Kingdom, on September 18th, during an interview with reporters at a bar in Manhattan, Trump stated that this interest rate cut is a "particularly unusual number," regardless of the Federal Reserve's motives. I think if they're not just playing politics, so lessening interest rates so much illustrates that the economy is far from satisfaction. Anyway, this is a conspicuous abatement in interest rates, "he said.

The global economy after interest rate cuts: taking action at the appropriate timing

The Fed's interest rate cuts will also tremendously affect the global economy. First and foremost, the Federal Reserve's interest rate cut will trigger a change in global capital flows. In general, interest rate cuts will cause funds to flow from countries with higher interest rates to countries with lower interest rates. Under such circumstance, global funds may flow to emerging market countries and other countries with lower interest rates. This will be conducive to augmenting the liquidity of funds in these countries and facilitating economic growth.

Aside from the Federal Reserve, several other central banks have recently announced interest rate cuts, and global monetary policy has gradually shifted towards easing. In early August, the Bank of England lowered its benchmark interest rate by 25 basis points to 5%; On September 4th, the Bank of Canada announced a 25 basis point reduction in its benchmark interest rate to 4.25%; The European Central Bank announced its second interest rate cut on September 12th; On September 18th, the Indonesian central bank lowered its key interest rate by 25 basis points to 6%, with an estimated 6.25%. Although the interest rate meeting announced the interest rate cut as scheduled, the Federal Reserve did not clearly disclose the future path of interest rate cuts. In this statement, Federal Reserve Chairman Powell emphasized that future policy adjustments will be based on further changes in economic data. Every move of interest rate cuts will affect the development of the global economic situation in the future. It can be concluded that the economic situation in multifarious regions across the planet is confronting choices and considerations for future development. To put it another way, they are waiting for opportunities in an environment full of uncertainty.

Rather than seeking others’ guidance, it's better to seek self support

China's economy has explored an independent and self-reliant development environment

On September 14, 2024, the National Bureau of Statistics of China released the macroeconomic data report for August. Despite facing complex as well as ever-changing domestic and international situations, the overall operation of the Chinese economy has remained stable, and high-quality development has continued to advance as a consequence of factors such as the effectiveness of macroeconomic policies, accelerated growth of new driving forces, and sustained growth in external demand. The total import and export volume of goods in China increased by 4.8% year-on-year in August. The trade structure continues to optimize, with the cumulative growth rate of mechanical and electrical product exports accelerating by 0.5 percentage points compared to July, accounting for nearly 60%. At the end of August, the balance of foreign exchange reserves increased by $31.8 billion compared to the end of July, and the RMB exchange rate also exhibited a stable and upward trend.

The Forum on China Africa Cooperation Summit, which opened in Beijing on September 4, 2024, has injected new impetus into the sustainable development of the global economy in a new historical stage. Africa actively participates in China's global development initiatives. By now, the total number of projects in the global development project library has exceeded 1000, with over 500 completed and ongoing projects, of which more than one-third have benefited African countries. The Global Development and South South Cooperation Fund provides important support for Africa and other developing countries to promote sustainable development. China will upgrade and increase the fund to 4 billion US dollars, which will better promote international cooperation in areas such as poverty reduction, public health, human resources, food security, digital connectivity, and green development. In the innovative field of economic development, in order to better grasp the opportunities of digitalized, networkized, and Intelligentized development in Africa, China and Africa are jointly discussing digital cooperation plans and sharing the dividends of the digital economy. At the China Africa Digital Cooperation Forum held in July this year, China and 26 African government departments jointly released the "Action Plan for the Development of China Africa Digital Cooperation", proposing that China and Africa jointly promote cooperation in six major areas: digital policies, digital infrastructure, digital innovation, digital transformation, digital security, and digital capabilities. The Beijing Action Plan (2025-2027) of the Forum on China Africa Cooperation proposes to jointly establish a China Africa Digital Technology Cooperation Center to promote the construction of 20 digital infrastructure and digital transformation demonstration projects by Chinese enterprises in Africa.