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24-10-2015, 07:09 AM
The People’s Bank of China cuts interest rates again
Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing
[b]China has ordered a fresh interest rate cut and reduced bank capital requirements, in a bid to help lift the economy’s recent flatlining performance and meet its official 2015 growth target.[/b]
In an announcement, expected by some economist, the PBoC said the one-year lending rate would be reduced by 25 basis points, effective tomorrow, to help boost lending across the economy. The news helped the Australian dollar to rally by nearly 1 per cent late this evening to trade at US$72.78c.
The economy expanded by 6.9 per cent in the third quarter, which was marginally below the official 7 per cent target but slightly above the financial markets consensus of 6.8 per cent.
However, there have been growing concerns that recent sluggish export and import figures could mean the economy misses its 7 per cent official growth target for the year which would be the second consecutive time during Premier Li Keqiang’s two year reign. Inflation also expanded by a weak 1.6 per cent during the third quarter.
In a statement tonight, the PBOC said the one-year lending rate would be cut form 4.6 per cent to 4.35 per cent and the one-year deposit rate sliced from 1.75 per cent to 1.5 per cent.
The Reserve Requirement Ratio, the level of capital banks must hold, will be also reduced by 50 basis points. A ceiling on deposit rates, which had been in place for decades in China’s tightly controlled banking system was removed which meant banks could offer rates than set by the central bank.
The PBoC has developed a habit of cutting rates on a Friday night, once the Chinese and Hong Kong markets are closed and before the final session of the week on Wall Street and major European markets end.
In London, the FTSE was already trading solidly in positive territory but bounced on the back of the PBoC news. Late last night, it was 94.02 points (+1.47 per cent) to 6470.3, while the New York Stock Exchange was yet to open.
Capital Economics chief Asian economist Mark Williams said the rate cut was part of a sustained monetary policy easing cycle which could extend further in the next few months.
“This is a controlled easing cycle that underlines how Chinese policy makers unlike many of their peers elsewhere still have room to manoeuvre,” he said.
“Policy easing — both monetary and fiscal — does seem to be helping ... fears that the economy was rapidly decelerating seem to have receded.”
- THE AUSTRALIAN
- OCTOBER 23, 2015 10:43PM
Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing
[b]China has ordered a fresh interest rate cut and reduced bank capital requirements, in a bid to help lift the economy’s recent flatlining performance and meet its official 2015 growth target.[/b]
In an announcement, expected by some economist, the PBoC said the one-year lending rate would be reduced by 25 basis points, effective tomorrow, to help boost lending across the economy. The news helped the Australian dollar to rally by nearly 1 per cent late this evening to trade at US$72.78c.
The economy expanded by 6.9 per cent in the third quarter, which was marginally below the official 7 per cent target but slightly above the financial markets consensus of 6.8 per cent.
However, there have been growing concerns that recent sluggish export and import figures could mean the economy misses its 7 per cent official growth target for the year which would be the second consecutive time during Premier Li Keqiang’s two year reign. Inflation also expanded by a weak 1.6 per cent during the third quarter.
In a statement tonight, the PBOC said the one-year lending rate would be cut form 4.6 per cent to 4.35 per cent and the one-year deposit rate sliced from 1.75 per cent to 1.5 per cent.
The Reserve Requirement Ratio, the level of capital banks must hold, will be also reduced by 50 basis points. A ceiling on deposit rates, which had been in place for decades in China’s tightly controlled banking system was removed which meant banks could offer rates than set by the central bank.
The PBoC has developed a habit of cutting rates on a Friday night, once the Chinese and Hong Kong markets are closed and before the final session of the week on Wall Street and major European markets end.
In London, the FTSE was already trading solidly in positive territory but bounced on the back of the PBoC news. Late last night, it was 94.02 points (+1.47 per cent) to 6470.3, while the New York Stock Exchange was yet to open.
Capital Economics chief Asian economist Mark Williams said the rate cut was part of a sustained monetary policy easing cycle which could extend further in the next few months.
“This is a controlled easing cycle that underlines how Chinese policy makers unlike many of their peers elsewhere still have room to manoeuvre,” he said.
“Policy easing — both monetary and fiscal — does seem to be helping ... fears that the economy was rapidly decelerating seem to have receded.”