In an unexpected move, the People’s Bank of China (PBOC) has slashed a short-term policy interest rate, indicating growing concerns about the country’s faltering economic growth and an intensified effort to stimulate recovery. This surprise rate cut, the first since August 2022, sees the seven-day reverse repurchase rate lowered by 10 basis points to 1.9%.
Market observers now anticipate a reduction in the one-year loan rate and subsequent lending rate decreases by banks. In addition, there is also speculation that PBOC could cut the Medium-term Lending Facility (MLF) interest rate as early as Wednesday.
Last week, PBOC Governor Yi Gang recently pledged to enhance “counter-cyclical adjustments,” indicating a shift towards more easing measures. He also expressed commitment to supporting the real economy, recognizing the lag in demand recovery compared to supply.
In this context, Bloomberg reported, citing anonymous sources, there are discussions in China about implementing a comprehensive set of stimulus measures in response to increasing pressure on Xi Jinping’s administration. These measures, which have been outlined by various government agencies and partially disclosed recently aimed at bolstering sectors like real estate and domestic consumption.