China cuts short-term borrowing costs to support recovery
The People's Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00% on Tuesday, when it injected 2 billion yuan ($279.97 million) through the short-term bond instrument.
China's central bank lowered a short-term lending rate for the first time in 10 months on Tuesday, to help restore market confidence and prop up a stalling post-pandemic recovery in the world's second-largest economy. The cut to the lending rate signals possible easing for longer-term rates over the next week and beyond as demand and investor sentiment weaken, adding to the case for urgent policy stimulus to sustain growth.
The People's Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2.00% on Tuesday, when it injected 2 billion yuan ($279.97 million) through the short-term bond instrument. "The central bank's rate cut decision was not a complete surprise to the market," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
"Commercial banks have already lowered deposit rates, and PBOC governor Yi Gang also mentioned strengthening counter-cyclical adjustment recently."The yuan hit a six-month low of 7.1680 per dollar after the rate decision while yields on China's benchmark 10-year government bonds fell to a fresh 7-1/2-month low.
Cheung said the PBOC may have wanted to mitigate the impact of any future policy easing on the Chinese yuan ahead of the Federal Reserve's policy meeting this week, which is keenly watched by financial markets.
China remains an outlier among global central banks as it loosens monetary policy to shore up growth while its major peers raise interest rates to counter surging consumer prices. Further interest rate cuts in China would only widen the yield gap with the United States, even if the Fed pauses this week, sending the yuan lower and accelerating capital outflows.
China is due to release May credit lending data and activity indicators, including retail sales and industrial production, this week.
Also Read: Disinflation process to be slow, says RBI Governor Shaktikanta Das
Also Read: US inflation slips from 4.9% to 4% in May, the lowest in two years
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
IRCTC Dividend 2024: Railway PSU announces 200% interim dividend - Check record date and other details
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
Power of Compounding: How many years it will take to reach Rs 2 crore corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000
07:10 PM IST