China’s Central Bank Cut One-Year Policy Loans to 2.85% on Slowing Economy

Source: Bloomberg

China has cut a major interest rate for the first time since the peak of the Covid-19 pandemic in 2020 as the struggling property market and repeated virus outbreaks hampered the growth outlook. CSI 300 Index up +0.86%, CNY USD up +0.09%

• The People’s Bank of China lowered the rate on its one-year policy loans by 10 basis points to 2.85%, the first cut since April 2020.
• PBOC also cut the rate on the seven-day reverse repo rate and injected 200 billion yuan ($31.5 billion) of medium-term cash into the financial system.
• Yewei Yang, an analyst at Guosheng Securities Co. stated that the PBOC had expanded its rate of policy easing to guide borrowing costs lower and boost credit supply.
• The move signals China’s economy is weak, and it will cause a massive drop in borrowing costs.
• Monday’s action sets China further apart from other central banks globally, which are looking to normalize monetary policies to control rising inflation.