SHANGHAI – China’s central bank lowered a short-term lending rate for the first time in 10 months on Tuesday, in a bid to restore market confidence and prop up a stalling post-pandemic recovery in the world’s second-largest economy.
Recent economic data has shown subdued demand and weaker investor sentiment, raising expectations that the authorities will ease monetary policy to sustain growth.
The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points (bps) to 1.9 per cent from 2 per cent on Tuesday, when it injected 2 billion yuan (S$374.9 million) through the short-term bond instrument.
“The central bank’s rate cut decision was not a complete surprise to the market,” said Mizuho Bank chief Asian FX strategist Ken Cheung.
“Commercial banks have already lowered deposit rates, and PBOC governor Yi Gang also mentioned strengthening counter-cyclical adjustment recently.”
He added that the PBOC may have wanted to soften the impact of future policy easing on the Chinese renminbi ahead of the US Federal Reserve’s policy meeting this week.
