China Cuts Rate to Calm Markets

China has sought to calm its panic-stricken stock markets by cutting interest rates and loosening constraints on bank lending after a second day of plunging share prices.

The People’s Bank of China (PBoC) reduced the one-year lending rate to 4.6% in a clear signal that it was prepared to head off a repeat of the stock market crash that hit the country in June. The benchmark Shanghai Composite fell by 7.6% on Tuesday, bringing its loss in the last two days to more than 15%.

The central bank also cut the one-year deposit rate to 1.75% in an effort to persuade Chinese savers to spend cash hoarded in the country’s banks.

China’s fifth interest rate cut since November lifted global markets, which recovered much of their losses after plummeting in response to China’s Black Monday.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza