Headquarters of the People's Bank of China, China's central bank, in Beijing in October 2018  Photo: IC

Following the US Federal Reserve's overnight interest rate cuts for the second time in a row, China's capital market is likely to benefit and depreciation pressure on the yuan will be alleviated, industry analysts told the Global Times on Thursday.

But it is not likely that the People's Bank of China (PBC), the country's central bank, will follow suit to cut its interest rates in the fourth quarter of the year, they continued.

The US Federal Reserve on Wednesday lowered interest rates by 25 basis points to a range of 1.75 percent to 2 percent amid growing risks and uncertainties stemming from the China-US trade war and a global economic slowdown. 

Following the Fed's move, China's A-share market opened higher on Thursday, with the Shanghai Composite Index 0.24 percent higher and the Shenzhen Component Index rising 0.34 percent. The NASDAQ-style ChiNext board rose 0.33 percent.

It is the second time this year that Fed cut the interest rate, following a cut in July, which was its first since the global financial crisis of 2008.

"The second rate cut is what the market broadly expected, although it came within two months of the last time, which reflects the US' rising downward economic pressure," said Liu Xuezhi, an economist at the Bank of Communications.

If the US economy weakens further, a "more extensive sequence" of rate cuts could be appropriate, said the Fed's Chair Jerome H. Powell. 

US President Donald Trump, who has repeatedly requested a larger rate cut to boost the economy, lashed out at the Fed shortly after the announcement, saying in a tweet that "Jay (Jerome) Powell and the Federal Reserve Fail Again. No 'guts,' no sense, no vision! A terrible communicator!" 

In response, several central banks, including that of Brazil, adjusted their rates lower after the Fed's cut. Hong Kong's monetary authority reduced the basic lending rate by 25 basis points to 2.25 percent on Thursday. 

The Bank of Japan kept monetary policy steady on Thursday, maintaining its short-term interest rate target at negative 0.1 percent.

The US' move to cut the interest rate, which can be easily transmitted to its market based on its high level of rate marketization, is not an appropriate tool for China to use to boost the economy, according to industry analysts.

Yang Wang, a research fellow at the International Monetary Institute affiliated with the Renmin University of China, told the Global Times on Thursday that the PBC will flexibly use its monetary tools according to the fundamentals of China's economy rather than forced to reduce rates under the influence of external factors.

"It is not likely that China will cut its interest rates in the short run to stimulate the economy, which faces downward pressure. Instead, tools such as medium-term lending facility (MLF) loans and the reform of the country's loan prime rate (LPR) mechanism are more effective for the market," said Yang.

China's central bank governor Yi Gang said in July that the country's interest rate level is appropriate and any change of policy will depend on China's economic conditions.

According to Liu, China's move to cut the reserve requirement ratio (RRR) is more effectively targeted at the economy in releasing liquidity. "But the possibility remains that if the last RRR cut cannot achieve ideal results in the fourth quarter, the central bank may think about an interest rate cut," Liu told the Global Times on Thursday.

China's central bank announced earlier September a RRR cut for financial institutions of 50 basis points in the latest effort to bolster the real economy.