China’s central bank unexpectedly cut key policy rates for the second time in three months on Tuesday, in a fresh sign that the authorities are ramping up monetary easing efforts to boost a sputtering economic recovery, reports Reuters. Analysts said the move opened the door to a potential cut in China’s lending benchmark loan prime rate (LPR) next week.
Tumbling credit growth and rising deflation risks in July necessitated more monetary easing measures to arrest the slowdown, market watchers said, while default risks at some housing developers and missed payments by a private wealth manager also affected financial market confidence. “All of these add to the urgency that policymakers need to act fast before consumer and business confidence deteriorate sharply,” said Tommy Wu, senior China economist at Commerzbank.
The People’s Bank of China (PBOC) said it lowered the rate on RMB 401 billion ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 15 basis points to 2.50% from 2.65% previously.