China opens floodgates for stimulus

(Bloomberg) — China’s policymakers have unveiled sweeping stimulus measures aimed at supporting demand and preventing the world’s second-largest economy from slipping into a deflationary spiral.

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The People’s Bank of China has cut interest rates on one-year loans and relaxed rules on buying second homes. The government also issued cash allowances and offered new subsidies for some unemployed graduates, while the Politburo promised to increase tax spending to stem falling property prices.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

Asia

A buoyant market reaction to the policy blitz suggests the central bank has bought the Chinese economy precious time. However, economists believe this is only a stepping stone if President Xi Jinping is to pull the roughly $18 trillion economy out of a prolonged crisis marked by a booming housing market, weakening consumer prices and rising trade tensions.

China’s central bank cut the interest rate on its one-year policy loans to the highest level on record, kicking off a broad confidence-building program. The People’s Bank of China cut its medium-term lending facility rate to 2 percent from 2.3 percent, the biggest cut since the bank began using the monetary instrument to guide market interest rates in 2016.

Gold demand in India looks poised for a strong few months as an import duty cut and what is likely to be a booming festival and wedding season boost buying in the world’s second-largest consumer of the precious metal.

US

The Federal Reserve’s preferred measure of core inflation and US household spending rose modestly in August, underscoring a cooling economy. On a three-month annualized basis, the core price index for personal consumption expenditures rose 2.1 percent, in line with the central bank’s target.

The U.S. economy has rebounded from the pandemic in stronger shape than previously estimated, boosted mainly by stronger consumer-driven growth fueled by robust earnings. The Bureau of Economic Analysis’ comprehensive annual update also showed that gross domestic income was revised higher in the first half of this year, which will help support household spending.

With prices down 19% from a 2022 peak, the commercial real estate market is starting to come alive. In part, that’s because lenders and homeowners are looking to cut losses and make new investments now that the Fed’s first interest rate cut in four years is bringing some clarity to the valuation situation.

The story continues

Europe

The Swiss National Bank cut borrowing costs by a quarter of a point at its third straight meeting and warned more would follow if needed as it tries to rein in the franc’s strength. With one of the lowest rates in the world, the central bank has limited scope to cut it further in any extended showdown with the foreign exchange market.

Inflation in France and Spain fell below 2 percent, fueling predictions by investors and economists that the European Central Bank will accelerate the pace of interest rate cuts.

Emerging markets

Mexico cut borrowing costs for a second straight meeting on Thursday as inflation eased faster than expected and the economy headed for a third year of slower growth. Banxico officials expect the inflationary environment to allow further adjustments to the benchmark rate.

Zambia’s economy is likely to grow at its fastest pace in 13 years in 2025 as it bounces back from its worst drought in more than a century.

World

Australia kept interest rates unchanged, while Sweden’s Riksbank cut borrowing costs and raised the possibility of a higher rate hike in the coming months. Hungary, Switzerland, the Czech Republic and Guatemala decreased rates, while Morocco remained constant. Nigeria surprised with a half-point increase to stem inflation, support its currency and attract investment.

Israel has stepped up its heaviest airstrikes on Hezbollah targets in Lebanon since 2006 after shooting down the militant group’s first ever rocket at Tel Aviv. The US, Europe and Arab states are scrambling to defuse the escalating fighting and prevent an Israeli ground offensive on Lebanon, which would likely entail high human and economic costs. Such a scenario could turn into a regional war that risks drawing Washington and Tehran into direct conflict.

China launched an intercontinental ballistic missile into the Pacific Ocean in what appeared to be its first such public test in nearly four decades, a move that could rattle the US as it seeks to influence world leaders at a meeting of the United Nations General Assembly United.

–With assistance from Maya Averbuch, Bastian Benrath-Wright, Matthew Boesler, Jackie Cai, John Gittelsohn, Philip Glamann, Sybilla Gross, Jon Herskovitz, Matthew Hill, William Horobin, John Liu, Zheng Li, Daniel Ten Kate, Henry Meyer, Taonga Mitimingi, Atul Prakash, Alex Tanzi, Alex Vasquez, Fran Wang, Alexander Weber, Natalie Wong and Heng Xie.

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