Xi Jinping warns Fed against raising interest rates

Chinese President Xi Jinping took to the virtual stage in Davos to address Fed Chairman Jerome Powell with this message: Please do not raise interest rates.

“If major economies slow down or reverse course in their monetary policies, there would be serious negative fallout. They would present challenges to global economic and financial stability, and developing countries would bear the brunt,” Xi said. , according to a transcript of his Monday remarks.

Of the major central banks, the Fed is expected to be the most aggressive, with financial markets now pricing in four rate hikes, and the US central bank simultaneously expected to begin shrinking the size of its balance sheet by nearly $9 trillion. Yields on the benchmark 10-year Treasury note TMUBMUSD10Y,
hit its highest level since January 2020 on Tuesday.

Traditionally, Fed officials brush off concerns about the impact of their policies on other economies, saying they can only craft monetary policy for the US economy.

Xi has reason to be nervous about Fed tightening.

Despite the tariffs that were initiated by President Donald Trump and maintained under President Joe Biden, Americans are still aggressively buying Chinese products. Until November, China was the first source of imported goods with 463 billion dollars, ahead of Mexico with 350 billion dollars and Canada with 324 billion dollars.

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Craig Bothan, chief “China+” economist at Pantheon Macroeconomics, pointed out that export growth has helped China offset weaker domestic growth and supported its manufacturing sector.

China’s economy continues to slow, falling to a 4% year-on-year growth rate in the fourth quarter from 4.9%. On Monday, the People’s Bank of China lowered two key rates by 10 basis points.