PBOC cut medium-term policy rate for first time in 10 months, more policy easing expected as economy recovery weakens
MACRO POLICY & REGULATION
PBOC cut medium-term policy rate for first time in 10 months, more policy easing expected as economy recovery weakens
MACRO POLICY & REGULATION

PBOC cut medium-term policy rate for first time in 10 months, more policy easing expected as economy recovery weakens

 

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China’s central bank cut the interest rate on its medium-term lending facility for the first time in 10 months on Thursday as the world’s second largest economy ramps up stimulus measures to shore up the economic recovery.

The People’s Bank of China cut the rate on 237 billion yuan ($33.09 billion) worth of one-year medium-term lending facility (MLF) loans by 10 basis points (bps) to 2.65%, from 2.75% previously.

The move comes after the central bank earlier this week lowered two key short-term policy rates, indicating that authorities are increasingly concerned about the weakening economic recovery.

Recent data has shown China’s recovery is stalling as domestic and global demand falters and the crisis-hit property sector fails to gain traction, raising expectations that authorities need to step up policy easing to boost growth.

“In the next nine months… we now expect the central bank to continue its monetary easing cycle with an additional 30 bps policy rate cuts in total, 50 bps of RRR cuts and 60-80 bps of mortgage rate cuts for both new and existing home loans,” economists at Barclays said in a note.

Goldman Sachs said an expected cut in banks’ reserve requirement ratio (RRR) may be postponed to the third quarter, as historically the central bank has almost never cut the policy rate and reserve ratio within the same month.