China Unexpectedly Cuts Key Rate, Adds Liquidity As Economic Growth Slowed, Retail Sales Slump
SUNDAY, JAN 16, 2022 - 09:28 PM
As Bloomberg reports, China lowered a key interest rate for the first time since the peak of the pandemic in 2020 as a property-market slump and repeated virus outbreaks dampened the nation’s growth outlook. The People’s Bank of China cut the rate on its one-year policy loans by 10 basis points to 2.85%. That’s the first reduction since April 2020. It also slashed the rate on the seven-day reverse repurchase agreements by the same magnitude to 2.1%.
The central bank made the move while offering 700 billion yuan ($110 billion) via the medium-term lending facility, exceeding the 500 billion yuan coming due. It added 100 billion yuan with seven-day reverse repos. “The PBOC has accelerated its pace of policy easing in order to guide borrowing costs lower and to encourage credit supply,” said Yewei Yang, an analyst at Guosheng Securities Co.
“The move suggests China’s economic is weak and it will trigger a significant slide in borrowing costs.
