China surprisingly cuts major policy rate by 15 basis points, signalling support for struggling economy
- The People’s Bank of China cut the rate of the one-year medium-term lending facility (MLF) by 15 basis points from 2.65 to 2.5 per cent on Tuesday
- The central bank also cut the seven-day reverse repo rate by 10 basis points to 1.8 per cent
China surprisingly cut a key policy rate on Tuesday in a sign that Beijing’s policymakers are willing to do more to support the struggling economy.
The People’s Bank of China (PBOC) cut the rate of the one-year medium-term lending facility (MLF) by 15 basis points from 2.65 to 2.5 per cent when selling 400 billion yuan (US$55 billion) of the liquidity tool half an hour before the release of July’s macroeconomic data.
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The Politburo, China’s prime decision-making body, also called on further policy actions to boost domestic demand and prevent risks.
On Tuesday, the central bank also cut the seven-day reverse repo rate by 10 basis points to 1.8 per cent.
“The PBOC lowered its policy rates by a larger-than-usual margin, amid growing concerns among policymakers about the health of Chinas economy,” said Capital Economics.
“A cut to the loan prime rate (LPR) later this month is now a given and we expect wider easing measures too. But monetary stimulus is of limited use in the current environment and won’t be enough, on its own at least, to put a floor beneath growth.”
