"Global Major Central Bank Dynamics" -- August 28 to September 4

The following is a report on the central bank policy dynamics of major countries and regions around the world from August 28 to September 4.

United States

Several Federal Reserve officials have signaled a potential interest rate cut, stating that concerns about the labor market remain the main reason they believe the Fed will lower rates in the future. Federal Reserve Governor Christopher Waller reiterated the need for a rate cut in September. Atlanta Fed President Raphael Bostic also reaffirmed his view that a rate cut is imminent. Minneapolis Fed President Neel Kashkari pointed out that "there is still room for a moderate reduction in interest rates in the coming years."

The Federal Reserve released its Beige Book, indicating that U.S. economic activity and employment conditions have remained largely unchanged or completely stable in recent weeks, with prices rising moderately or at a modest pace. This report presents a mixed picture, highlighting the impact of tariffs and other policies from the Trump administration on households and businesses as the Fed considers whether to cut rates this month.

St. Louis Federal Reserve Bank President James Bullard stated that, given the current economic data, the Fed's monetary policy is appropriately positioned, but he also noted that risks in the labor market have increased.

Federal Reserve Governor Christopher Waller intensified calls for lowering short-term borrowing costs in the U.S., stating that he would support a rate cut next month and further cuts within the next three to six months to prevent a collapse in the labor market. He said, "Based on what I know now, I will support a 25 basis point cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 16-17." He also mentioned that there is "no fixed order" for rate cuts.

San Francisco Fed President Mary Daly reiterated on social media that, given the risks facing the labor market, she supports a rate cut, stating, "We need to adjust policy soon to better fit the current economic situation." She added that there are signs of a slowdown in the labor market, and while tariffs are pushing up inflation, she believes that the price increases related to tariffs will be one-time events.

Federal Reserve Governor Michelle Bowman has filed a lawsuit claiming that President Trump does not have the authority to dismiss her, a case that could reshape the long-established norms of Federal Reserve independence. Trump announced Bowman's unprecedented dismissal on August 25, and the lawsuit states that this action violates the federal law stipulating that Federal Reserve governors can only be removed for cause. The hearing on Trump's dismissal of Federal Reserve Governor Bowman has concluded, and the judge did not immediately rule, meaning Bowman will remain in her position for now.

Greater China Region

The Ministry of Finance of China and the central bank recently held the second meeting of the joint working group. The meeting pointed out that the next step is to continue deepening cooperation, strengthening coordination, and continuously promoting the stable and healthy development of China's bond market, jointly ensuring that fiscal and monetary policies are better implemented and effective.

The People's Bank of China released a table showing the liquidity injection of various central bank tools in August, indicating that in August, the net withdrawal of pledged supplementary loans (PSL) was 160.8 billion yuan; other structural monetary policy tools had a net injection of 100.5 billion yuan for the month. The total net injection for reserves, central bank loans, and open market operations in August was 386.5 billion yuan.

The preparation work for the first batch of stablecoin license applications in Hong Kong was completed at the end of August. The Monetary Authority stated that it received a total of 77 expressions of interest for stablecoin license applications, involving banks, e-commerce, payment institutions, etc. The Monetary Authority will not disclose the names of the institutions that expressed interest or formally submitted applications Europe

The minutes from the European Central Bank's July meeting show that policymakers were divided on whether inflation would be above or below expectations, indicating that a fierce debate will unfold in the coming months. The European Central Bank kept the benchmark interest rate unchanged at 2% during its meeting on July 23-24. Sources indicate that rates may remain unchanged in September, followed by a potential restart of discussions on further rate cuts in the fall, especially if the economy weakens under the impact of U.S. tariffs.

ECB President Christine Lagarde stated that if U.S. President Trump were to dismiss Federal Reserve Chairman Powell or Fed Governor Cook, it would pose "very serious dangers" to the U.S. economy and the global economy. Lagarde also mentioned that France's current situation does not require intervention from the International Monetary Fund (IMF), but the risk of any eurozone government collapsing would be "concerning." She noted that Italy would soon exit the EU's "excessive deficit procedure," as its budget deficit to GDP ratio is approaching the 3% target.

Lagarde stated that EU lawmakers should require foreign stablecoin issuers to adopt "safeguards" and "strong equivalence frameworks" to prevent the risk of a run on EU reserves.

ECB Executive Board member Isabel Schnabel stated that the ECB should maintain stable interest rates, as the eurozone economy remains stable despite the impact of U.S. tariffs, and inflation may still be above expectations. Schnabel warned that undermining the independence of the Federal Reserve could backfire, raising rather than lowering borrowing costs, while disrupting the entire global financial system.

ECB Governing Council member François Villeroy de Galhau stated that President Trump's escalating attacks on the Federal Reserve could have substantial global ripple effects on financial markets and the real economy, including rising inflation.

Bank of England Governor Andrew Bailey stated that the market has understood his message that interest rates will continue to "gradually decline over time," but there is currently less certainty about the pace of rate cuts. Disagreements within the Bank of England's Monetary Policy Committee have intensified, with member Silvana Tenreyro expressing a desire for 4-5 rate cuts per year, while Deputy Governor Ben Broadbent and member Catherine Mann are more cautious about further cuts.

Bailey also mentioned that the decision regarding the pace of the quantitative tightening (QT) plan this month remains uncertain. He expressed "great concern" over the threat to the independence of the Federal Reserve.

Japan and South Korea

Bank of Japan Governor Kazuo Ueda stated that he discussed various topics related to the economy and markets, including foreign exchange rate fluctuations, during his meeting with Prime Minister Shigeru Ishiba. After the meeting, Ueda told reporters, "It is best for the exchange rate to fluctuate steadily, reflecting the fundamentals." He added that the central bank will carefully examine exchange rate trends while maintaining close communication with the government. Regarding monetary policy, Ueda stated that if the economic and price trends align with the Bank of Japan's forecasts, the central bank's willingness to continue raising interest rates will not change The Deputy Governor of the Bank of Japan, Masayoshi Amamiya, stated that the tariffs imposed by the Trump administration are the result of a broad political and social movement that goes beyond economic objectives. This is a rare comment on politics from the central bank.

Amamiya indicated that the Bank of Japan should continue to raise interest rates but warned that global economic uncertainty remains high, suggesting that the central bank is not in a hurry to push up currently low borrowing costs. He mentioned that while the trade agreement reached between Japan and the United States helps alleviate economic uncertainty, the specific impact of U.S. tariffs is still unknown.

Bank of Japan Policy Board member Junko Nakagawa stated that appropriate monetary policy will be implemented to steadily achieve the Bank of Japan's 2% inflation target; policy decisions will be made at each policy meeting based on hard data, including the central bank's Tankan survey.

The Bank of Korea stated that even if a trade agreement is reached, the increase in U.S. tariffs will still have a "significant" impact on the South Korean economy, as South Korea faces a larger increase in tariffs compared to its export competitors, and the impact of tariffs on specific products is also greater.

Australia

The Governor of the Reserve Bank of Australia, Philip Lowe, stated that economic growth in the second quarter was slightly stronger than expected, and if consumers continue to spend generously, there may not be multiple rate cuts in the future.

Others

The Reserve Bank of India stated in its monthly report that the Indian economy remains resilient, supported by strong rural demand, but trade tensions with the United States could pose downside risks to economic growth.

The Governor of Bank Indonesia stated that the central bank has been guiding the rupiah to strengthen and will strive to keep the rupiah around 16,300 against the U.S. dollar, after the rupiah fell due to domestic unrest in Indonesia.

The Bangko Sentral ng Pilipinas (BSP) lowered its key policy rate by 25 basis points to 5.0%, as expected, marking the third consecutive rate cut by the central bank. "Looking ahead, the BSP will maintain price stability by ensuring that the monetary policy setting is conducive to sustainable economic growth and employment," the central bank said.

BSP Governor Felipe Medalla stated that if inflation and growth prospects remain unchanged, policymakers are likely to keep interest rates steady for the remainder of the year