China issues first interest rate cut since 2008

China’s central bank cut the one-year lending and deposit rates for banks by 25 basis points each on Thursday, the first rate cut since 2008 as Beijing seeks to counter an economic slowdown, Reuters reported. The official one-year borrowing rate is now 6.31%, while the one-year deposit rate is 3.25%. Regulators also gave the banks additional flexibility to set competitive lending and deposit rates: Beginning June 8, deposit rates can range up to 110% of the benchmark rate and loans can be offered for 80% of official rates, down from the current 90% limit. Wang Qinwei of Capital Economics called the additional flexibility a “significant move.” “It’s a first step in rate liberalization and it increases the returns for households,” he said. News of the rate cuts pushed up the MSCI world equity index to its highest level in more than a week. However, some analysts said the move raises concern that economic data due to be announced over the weekend will be worse than expected.