PBOC Targeted Easing Clashes With Fed Hike Path as Bitcoin Stalls

China's central bank followed through on its pledge

On September 24, the People's Bank of China said it would make comprehensive use of its monetary policy tools, adjust them in a timely way to keep liquidity ample, and lean harder against the slowdown.14 The statement came from the bank's third-quarter monetary policy committee meeting. It also repeated that policy would stay "appropriately loose" and that the yuan should remain basically stable at a reasonable level.1920 Newsquawk read the wording skeptically at the time. Its note called this kind of language a standard formulation that has historically carried little information, and pointed out that the PBOC has sometimes let similar phrasing go unused for long stretches.14

This time the bank acted within a week. A State Council executive meeting on September 28 called for timely adjustment of monetary policy tools. The next day the PBOC announced a set of structural measures.11 It cut the one-year pledged supplementary lending (PSL) rate by 25 basis points, from 1.75% to 1.5%. It also widened PSL eligibility for the first time to cover the "six networks": water, new-type power grids, computing power, next-generation communications, urban underground pipelines and logistics.1213

Relending quotas went up as well. The technology innovation and equipment upgrading facility gained 200 billion yuan, bringing it to 1.4 trillion yuan, and its funding support ratio rose from 60% to 100%.12 The agriculture and small-business facility gained 500 billion yuan, for a combined quota of 4.85 trillion yuan. That figure includes a 300 billion yuan increase to private-enterprise relending, which now stands at 1.3 trillion yuan.1112 The two relending increases together total about 700 billion yuan, or roughly $104 billion.12

Other measures came at the same time. The Ministry of Finance, the PBOC and the National Financial Regulatory Administration jointly announced a mortgage subsidy for first-time buyers, effective October 1. It pays one percentage point a year for up to five years on loans of up to 1 million yuan.12 Separately, Briefs reported that the PBOC had quietly opened an uncapped relending channel. It gives banks cheap funds to lend mainly to local government financing vehicles so they can pay overdue bills to contractors and suppliers. The bank has not announced this tool publicly.17

Targeted lending, not across-the-board stimulus

Reports on the September 29 package agree on what it contains and what it leaves out. The PBOC did not cut its benchmark rates. It did not lower reserve requirements across the system. Every measure goes through targeted channels to particular sectors.1112 Caixin described the package as Beijing directing financing toward priority areas.11 BigGo's account quoted Fu Yifu of Subank, who said future steps could include reserve requirement and rate cuts but would not amount to "flood-style stimulus."12

The economic data help explain why Beijing acted. Fixed-asset investment shrank in 2025, the first decline since the series began almost 30 years ago. It fell another 7.2% year on year in January through August 2026, and private investment dropped by more than 10% over the same period.17 China Chengxin estimated that unpaid bills owed by local governments and their affiliates reached 4.5 trillion yuan, more than 3% of GDP.17 Nomura economists argue that clearing these arrears has to come before domestic demand can recover.17 On that view, the unannounced arrears facility may end up mattering more than the PSL cut that got the attention.

In our reading, the PBOC is trying to support growth without loosening aggregate policy enough to put pressure on the currency. The external backdrop supports that interpretation. BigGo noted that the U.S. 30-year Treasury yield had reached 5.60%, its highest since 2002, and it described the choice of structural tools as a way to support growth while limiting spillover from high interest rates abroad.12 The currency has been strong rather than weak. In late September the PBOC set the USD/CNY fixing at about 6.74.18 On October 8 the bank said China has neither the need nor the intention to devalue the yuan for a trade advantage, and that it will begin reporting additional foreign-exchange data to the IMF in 2027.15

The Fed is moving the other way

The most notable feature of this easing is the policy direction in Washington. On September 16 the Federal Reserve voted 12-0 to raise its target range by a quarter point, to 3.75%-4.00%. It was the Fed's first hike since 2023.67 Chair Kevin Warsh said inflation "is too high and has been for too long."6 Minutes released on October 7 showed that most participants thought another increase would probably be appropriate by the end of the year.1

Traders' expectations for the October 27-28 meeting have shifted sharply. An October hike was priced at about 75% on September 29. It fell to roughly 16%-18% by October 9 after September payrolls rose by only 29,000.1 Prediction markets were still pricing a hold at about 80% shortly before the September CPI release.910 Only one of 14 brokerages surveyed, BofA, expected a hike this month.1 Governor Christopher Waller said further hikes "do not need to come at consecutive meetings," and markets took that as room to pause in October.1

Then came the CPI report on October 14. Crypto Times reported that headline inflation rose to 3.7% and that core inflation was stronger than expected. It cited Sygnum Bank's view that the result puts an October hike back in play.27 Earlier in the month, one market preview had said a core reading of 0.3% or more could bring back bets on an October move.1

This is where the two central banks matter for global markets. China is easing through targeted channels while the United States is tightening, or at least maintaining a bias toward tightening. That leaves the dollar and U.S. real yields as the main forces in global liquidity. Chinese credit measures directed at power grids and small manufacturers are unlikely to change that in the near term.

Bitcoin is tracking the Fed, not Beijing

Bitcoin's recent moves follow that logic. On October 13 it was trading around $83,400. IG's Chris Beauchamp said it was struggling to gain momentum after falling sharply from its seven-month high of $87,315 on September 21, and he attributed part of the weakness to the prospect of more Fed hikes.28 A liquidation wave the week before had pushed the price down to about $80,400 and wiped out more than $1 billion in leveraged positions in a single day.2329 Spot ETF outflows also pointed to weaker demand from funds.23

In Asian trading on October 14, bitcoin rose about 1.5% to just under $83,900. New York Fed President John Williams had said he saw no need for further rate increases in 2027, which weakened the dollar.21 BigGo reported that Williams still left open the possibility of one more increase this year.24 The gain did not last. After the hotter CPI figures, bitcoin fell below $83,000, and CoinDesk's price page later showed it around $81,800, down about 1.6% on the day.2726

Recent coverage of bitcoin does not attribute its moves to Chinese policy. The sources cited are Williams, CPI, Treasury yields, ETF flows and leverage.212628 BigGo said digital assets have become more sensitive to macroeconomic signals than to crypto-specific news.24 We think the PBOC's measures are too targeted and too focused on the domestic economy to move crypto prices much in the short run. Their design is meant to keep the money in specific sectors of the Chinese economy.

Where coverage diverges

Crypto market commentary is not consistent on the U.S. policy outlook. A TradingKey preview before the CPI release said a soft reading could "solidify" a Fed rate-cut path at the October meeting.22 That does not match the rest of the reporting. The Fed's last move was a hike, the minutes favored more tightening, and prediction markets put the odds of an October cut below 1%.169 CryptoQuant data reported by Bitget offered a more bullish structural view: bitcoin is up 29% since June 12 even as the dollar strengthened and rates climbed.30 That gain is real. Even so, the price action of the past three weeks shows the asset losing ground each time the outlook for U.S. rates tightens.

Analysts also disagree about how much the PBOC's statements tell you. Newsquawk was skeptical that the September 24 language would lead to action.14 Mainland economists quoted by BigGo saw clear continuity from the July Politburo meeting through the quarterly report to the September 29 tools.12 Events supported the second view, since the measures arrived within days. Still, the skeptics are right that the PBOC chose targeted adjustments over a decisive move on benchmark rates.

What to watch

The next big event is the Fed's October 28 decision, followed by Warsh's press conference. Officials go into their blackout period on October 17.1 The September PCE and the first estimate of third-quarter GDP come out the next day, which means the Fed will vote without them.1 In China, the questions are whether the new relending quotas are actually used and whether payments to suppliers through the arrears facility start to clear receivables.17

For bitcoin, U.S. data and Fed decisions will matter much more than Chinese stimulus. The PBOC kept its pledge, but its measures are aimed at China's domestic economy. Crypto markets are reacting to the dollar and U.S. interest rates.