U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on Sept. 18, 2024. (Photo/Xinhua)

Chongqing - The U.S. Federal Reserve cut interest rates by 50 basis points on Wednesday to 4.75-5 percent. This marks the first cut since March 2020, signaling the start of an easing cycle.

"Recent indicators suggest that economic activity has continued to expand steadily. Job gains have slowed, and the unemployment rate has increased but remains low. Inflation has made further progress toward the Committee's 2 percent objective but remains somewhat elevated," the Federal Open Market Committee (FOMC), the central bank's policy-setting body, said in a statement.

"In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the FOMC said.

Data released by the U.S. Department of Labor showed that the Consumer Price Index (CPI) rose by 2.5 percent year-over-year in August, a decrease of 0.4 percentage points from July. This marks the smallest increase since February 2021, indicating continued signs of easing inflation. Meanwhile, the layoffs in July rose to 1.76 million, the highest level since March 2023.

"As such an important driver of global growth, this is bound to have an effect on asset prices around the world," Richard Carter, head of fixed interest research at Quilter Cheviot, said to CNBC. That includes gold, which hit a record high this week on expectations of a move by the U.S. central bank, he added.

Higher rates are generally viewed as a drag on gold since they make fixed-income investments, such as bonds, more attractive. Oil and other commodities, usually priced in dollars, often receive a boost with a rate cut, as a lower cost of borrowing can stimulate an economy and increase demand, he explained.

From March 2022 to July 2023, the Fed raised interest rates 11 consecutive times, increasing 525 basis points. Over the past year, the Fed has kept the federal funds rate target range at 5.25 to 5.5 percent, the highest level in over two decades.

Economic View cited Shenwan Hongyuan Securities' analysis, noting that there is a lag in the transmission of monetary policy to the real economy, and the real economy's sensitivity to interest rates has declined over time. Therefore, the firm does not believe that the rate cut will immediately reverse the weakening trend of the U.S. economy. However, quantitative estimates indicate that after the Fed's rate cut, interest rate-sensitive areas such as consumer spending, residential sales, and fixed asset investment are likely to see a boost.

Haitong Securities noted that the Fed's rate cut could enhance both macro and micro liquidity in the A-shares market in the short to medium term, potentially supporting an upward trend. However, Economic View reported that the effect of the rate cut on A-share fundamentals, which is closely tied to medium—to long-term performance, remains to be observed.

News outlet Finance.youth.cn cited experts who believe that with the Fed's rate cut and the start of an easing cycle, the U.S. dollar is expected to weaken further, benefiting major global currencies, including the renminbi. This rate cut may also attract capital back to China, which would benefit the Chinese economy and boost domestic markets such as stocks and real estate.