Why China Held Its Key Rate Steady Despite U.S. Fed Cuts

China’s central bank opted to keep its primary policy rate unchanged at 1.40%, defying expectations that it might follow Washington’s lead after the U.S. Federal Reserve trimmed its own rates just hours before. Despite signs of a cooling economy, sharp export growth and a buoyant stock market have given policy-makers confidence to hold off on new stimulus—for now.
Data from August show economic activity is slowing, but not as sharply as many had feared. Analysts point out that strong export performance may remain a key buffer, and the authorities may be deferring fresh easing measures until later in the year. The central bank injected ¥487 billion via seven-day reverse repos into the system, reinforcing liquidity even while keeping borrowing costs steady.
Ever mindful of side effects, some, including economists from Nomura, warn that a big stimulus effort could inflate asset bubbles, particularly in equity markets. Should markets pull back, however, a small rate cut—possibly around 10 basis points—could still be in the cards in the near term.
With China targeting about 5% growth for the year, current forecasts suggest that while growth is moderating, it isn’t collapsing. Many believe that after the Fourth Plenary Session in October, there may be more visible shifts toward short-term growth supports while longer-term reforms stay on the agenda.
For now, China's policymakers seem to be choosing caution over haste—balancing between supporting growth and managing risks in an uncertain global environment.