Summary: China has unexpectedly cut interest rates after gross domestic product (GDP) growth fell to an 18-month low because of lockdowns and property development turmoil, causing President Xi Jinping to warn against premature rate hikes in the United States.
‘You do you. We’re cutting’ China unexpectedly eased monetary policy late yesterday after reporting its slowest GDP growth in 18 months. GDP grew at an annual rate of 4.0% in the December quarter which was down from 4.9% the previous quarter and well below the government target of 6.0%. Hard lockdowns to eliminate covid, including fresh ones in recent weeks to stop omicron, have hit factory output and consumer spending. Turmoil in China’s apartment development sector has also cooled its expansion. (Reuters)
‘Don’t hike early’ China’s President Xi Jinping emphasised the diverging states of the world’s largest and second-largest economy this morning by warning the United States not to hike interest rates too much or too early, saying it could cause turmoil in developing countries who have large US dollar debts. Xi made the comments this morning in an online Davos forum.
Really hard lockdowns China locked down an office building in Beijing after finding a single case of omicron inside. It also announced members of the public would not be able to attend Winter Olympic events as spectators to limit the spread of omicron. (CNN).
Slower US growth too US economists have lowered GDP growth forecasts because of omicron and the effects of higher mortgage rates and inflation on consumer demand, WSJ reported from its survey. They now see March quarter growth of around 3.2%, down from expectations late last year of over 4.0%. Meanwhile, Europe’s largest economy, Germany, is set to slide back into its second recession of the pandemic era due to omicron and weak consumer spending.
Quiet markets US financial markets were quiet overnight, with most closed for the Martin Luther King holiday.
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