Breaking News! The Federal Reserve cut interest rates by 25 basis points at midnight: What are the impacts on global markets, the Chinese economy, the RMB, and foreign trade companies?

On September 17, 2025 , local time, the Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 4.00%–4.25% , and hinted that it may continue to cut interest rates this year. This is the first interest rate cut by the Federal Reserve in 2025 and another round of easing following three interest rate cuts in 2024.

An article explains clearly what signals the Federal Reserve is sending, how the global market reacts immediately, the impact on China's macro-economy and the RMB, and the practical response suggestions and precautions for foreign trade companies (receiving US dollars/settling foreign exchange/financing).

1. Key signals released by the Fed’s interest rate cut

1. The start/continuation of a "rate-cutting cycle" : The Fed not only cut interest rates by 25 basis points but also hinted in its statement and dot plot/meeting minutes that additional rate cuts are possible in the coming months. This has clearly shifted monetary policy from a "wait-and-see/neutral" stance to a "gradual easing" approach. This will alter market expectations of future interest rate differentials and funding prices.

2. The focus has shifted from "high inflation" to "softening employment" : The Federal Reserve has publicly listed the recent weakening of the labor market as one of the reasons for its decision (risk-management), indicating that if employment continues to be weak, monetary policy will be more inclined to support growth rather than simply prevent inflation.

3. There is not complete consensus within the Federal Reserve : some officials opposed a smaller rate cut (dissenting votes), indicating that there is still uncertainty about the pace and intensity of rate cuts, which will increase market volatility in the short term.

2. Immediate and short- to medium-term reactions of global markets

• Risk assets were generally boosted, but volatility increased : global stock markets showed "divergence and volatility" on the day the announcement was released - some stock indices were reported to have hit record highs, but the technology sector/growth stocks also consolidated, and the closing showed a mixed trend. The short-term sentiment was mainly "good for risk assets, but news-driven volatility."

• Treasury bonds and yields: Short-term interest rates are shifting downward, and the curve may be repriced . Treasury bonds of different maturities are reacting differently, and the market is fluctuating as it reprices the number of future rate cuts. Some reports indicate that yields on 10-year and other bonds are fluctuating on the news.

• The US dollar is under overall pressure, but not in a one-way direction : judging from a longer-term cycle, the US dollar is on a weakening trend (with a significant weakening in 2025), and this interest rate cut further increases the probability of the US dollar coming under pressure, but in the short term, it will fluctuate due to capital flows, politics and technical factors.

• Commodities and Metals : Precious metals saw significant fluctuations around the news—gold prices had already reached a record high, and the rate cut news caused them to surge before retreating. Crude oil remained relatively stable (driven by supply, demand, and geopolitical factors). Overall logic: A weaker US dollar and lower interest rates are generally supportive for commodities and precious metals, but they may be disrupted in the short term by profit-taking and liquidity factors.

III. Implications for China’s Macroeconomic and Monetary Policy

• The People's Bank of China (PBOC) is maintaining a wait-and-see approach in the short term and has not yet cut interest rates. Following the Fed's rate cut, the People's Bank of China (PBOC) did not immediately follow suit with further cuts in open market operations and the policy rate (the 7-day reverse repo rate has remained stable at a low level recently). The central bank is preferring a "paced and targeted" approach to support the economy rather than passively following the Fed. Media and market reports indicate that the PBoC has chosen to maintain its policy rate for now.

• Reason : China faces a policy balance: on the one hand, it wants to support growth (necessitating interest rate cuts and targeted support), while on the other, it must guard against financial and asset bubbles (especially in the stock market and real estate) and capital outflow pressure. Therefore, even if the Fed cuts rates, the PBoC may choose to ease at a different pace or use only targeted tools (such as reserve requirement ratio cuts, MLF, reverse repos, and structural instruments) rather than simply copying the Fed.

• An example of regional linkage : The institution associated with the Hong Kong Linked Exchange Rate (HKMA) adjusts local interest rates based on the direction of US dollar interest rates (HKMA then follows suit and adjusts its benchmark interest rate the following day), showing that global currency linkages remain strong in some regions.

IV. RMB (CNY) Exchange Rate: Possible Short- and Medium-Term Trends and Logic

Observed market facts : Before expectations of a Fed rate cut grew, the RMB had already shown some strength (reports indicate it briefly rebounded to a 10-month high). Following the Fed's actual rate cut, the RMB's performance against the US dollar will be influenced by both US dollar liquidity and domestic policy stances in the short term. The latest spot data (trading platform) shows that USD/CNY fluctuated around 7.10 on September 18th (for reference only, data changes in real time with the market).

Why the RMB may strengthen :

1. The US dollar is under pressure during the interest rate cut cycle → the local currency is relatively stronger (if China's capital flows stabilize or its foreign trade surplus expands).

2. If the PBoC does not relax quickly, or maintains a sound monetary policy (tighter than the US or not lowering it at all), the narrowing of the interest rate gap will attract capital inflows into domestic assets, supporting the RMB.

However, there are also constraints and reverse risks :

• If China adopts more easing measures (such as interest rate cuts/RRR cuts) to stimulate growth and the market is concerned about fiscal policy or growth quality, capital outflows may occur → the RMB will come under pressure.

• Geopolitics, trade frictions or foreign capital withdrawal may also put pressure on the RMB against the US dollar.

Conclusion (contextualization) :

• Scenario A (most likely, short-term) : A weak US dollar and a stable PBoC → the RMB appreciates moderately or maintains strong fluctuations (a small appreciation in the short term).

• Scenario B (less likely) : If the PBoC is forced to ease significantly or capital concerns intensify → RMB will come under pressure.

5. Direct Impact and Strategic Recommendations for Foreign Trade Enterprises (especially Those with US Dollar-denominated Revenues)

Core conclusion : The Fed's interest rate cut has increased the probability of RMB appreciation against the US dollar (but it is not certain). Therefore, foreign trade companies should make risk allocation between "locking in profits" and "expecting a better exchange rate" - reasonably use batch settlement, forward/option tools and business-side adjustments to avoid unilateral bets.

Impact Points

1. Changes in value at the time of settlement : If the US dollar weakens and leads to RMB appreciation, postponing settlement may bring more RMB gains; however, the US dollar may still fluctuate in the short term, and postponing all settlements carries the risk of having the gains eaten up by reverse fluctuations.

2. Financing costs : The implicit cost of US dollar borrowing/dollar-denominated notes may decline (due to falling US Treasury yields), but domestic RMB interest rates and bank loan pricing are also affected by the PBoC policy. For companies with short-term US dollar debt, short-term refinancing pressure may ease.

3. Letter of Credit/Document Advance/Factoring : L/C discount rates, document advance costs, etc. vary with changes in US dollar interest rates and domestic bank pricing - you can renegotiate or lock in more favorable bank rates.

Practical recommendations (immediately actionable checklist, prioritized)

1. First, do an inventory : list the dollar receivables for the past three months, their due dates, any forward/option contracts already signed, and the size and interest rates of existing dollar liabilities. — (Immediately)

2. Phased foreign exchange settlement (common ratio) : For example, divide maturing US dollar receivables into three parts: 30% immediate settlement (locking in profits/covering short-term RMB expenses) + 40% hedging with forward contracts (3–6 months) + 30% withheld (waiting for a more favorable exchange rate) . This "gradient" approach ensures liquidity while capturing appreciation potential. (Example ratio, adjustable)

3. Using bank forwards and options :

   • Forward contract : locks in the future exchange rate, suitable for companies that have determined future RMB outflows.

   • FX Options : These offer the potential for positive returns at a lower cost while providing a guaranteed exchange rate (higher cost than forward contracts but retaining flexibility). Suitable for large-volume foreign trade companies with a moderate risk tolerance.

4. Optimize short-term financing/settlement methods : If you have a US dollar loan, discuss with your bank whether you can switch from a floating interest rate to a more favorable fixed or tiered rate, or hedge your US dollar liabilities with US dollar assets. If you use a L/C, you can negotiate a lower interest rate for the letter of credit with the issuing bank.

5. Adjust quotations and contract terms : For new orders, consider:

   • Change the pricing of some orders to RMB (if acceptable to the buyer) to transfer exchange rate risk;

   • Write an “exchange rate floating clause” into the contract or allow for short-term price adjustments (e.g. ±X%) to spread the risk.

6. Managing foreign exchange exposure (Netting) : If the company has both US dollar revenue and US dollar expenses (such as paying for shipping and overseas purchases), try to hedge internally and do not convert all US dollars into RMB and then buy them back.

7. Establish or adjust risk plans (stop-loss/take-profit rules) : For example, set an operating rule of "automatically convert or hedge when the RMB appreciates/depreciates by X%" to avoid relying entirely on subjective judgment in the end.

8. Data communication with banks : Ask your bank/dealer to provide 1-month, 3-month, and 6-month forward points and option quotes, compare costs and then make a decision.

9. Coordination between taxation and accounting : The time of foreign exchange settlement will affect current profits and cash flow. Confirm the accounting and tax treatment with finance, audit, and tax colleagues first (especially for large one-time foreign exchange settlements).

10. Continue to monitor two key indicators : the Fed's subsequent announcements and the pace of interest rate cuts (which will impact the long-term direction of the US dollar) and China's macroeconomic policies (PBoC operations, foreign exchange reserves, and cross-border capital flows). It's recommended to monitor core data and central bank movements daily.

6. If we divide the recommended strategies into three categories according to the scenarios

1. Conservative (small and micro enterprises/tight cash flow) : Prioritize ensuring operating funds, immediately settle/lock in 50-70% of the foreign exchange , and hedge the rest in batches + forward.

2. Balanced type (medium-sized enterprises, can accept certain fluctuations) : adopt the 30/40/30 batch method mentioned above, and use a small amount of options to guarantee the bottom line.

3. Aggressive (large enterprises with dedicated finance teams) : They can reserve a higher proportion of foreign exchange positions (maintain exposure to the US dollar), but use options and forward combinations for active hedging and establish automated hedging strategies (based on threshold triggers).

7. Medium-term impact on foreign trade and the macro environment (2–12 months)

• Cost side : If the US dollar continues to weaken, the cost of importing raw materials denominated in US dollars will fall (which is beneficial to companies that rely on US dollar raw materials).

• Pricing and competitiveness : RMB appreciation will reduce export earnings denominated in RMB. If competitor currencies also appreciate, the impact will be limited. However, if competitor currencies weaken, you may face pricing pressure.

• Trade financing and capital costs : The downward trend in US dollar interest rates will reduce international financing costs, but the changes in domestic banks' RMB loan interest rates are the key to practical operations.

8. Risk Warning (Three Major Risks You Must Pay Attention to)

1. "Policy gap" risk : The Fed's interest rate cuts are not synchronized with the PBoC, which may lead to large-scale cross-border flows of short-term funds, causing abnormal fluctuations in the RMB or asset prices in the short term.

2. Political/geopolitical and regulatory risks : Trade frictions or temporary adjustments to capital controls could affect the freedom of foreign exchange settlement and the availability of foreign exchange swap/forward markets.

3. Market volatility risk : Driven by news in the short term, exchange rates, interest rates, and commodity prices may "rise and then fall." Avoid excessive leverage or betting your entire position on a single forecast.

9. One Sentence of Advice (for CEO/CFO)

Don't gamble unilaterally waiting for a "better exchange rate"—use a combination of batch settlement and forward/option contracts to simultaneously achieve both the goals of "locking in profits" and "earning additional returns." (Implementation details are customized based on cash flow and risk tolerance.)

10. Conclusion

The Fed's recent rate cut has pushed the market from a "high-interest rate norm" to a "gradual easing" path. This will reshape the US dollar interest rate curve and drive capital to seek higher-yielding global allocations, indirectly impacting the RMB and Chinese assets. For foreign trade companies, the key is not accurately predicting the immediate level of US dollar depreciation, but rather establishing an enforceable foreign exchange settlement/hedging system that protects cash flow and profits under varying market conditions —a more reliable approach than a one-time bet.