China’s surprise interest rate cut on Friday spurred Asian indices on Monday, mirroring a positive session on Wall Street.
In an unexpected move after the Shanghai Composite index closed for the week, the People’s Bank of China cut its benchmark interest rate for the first time in over two years to support its cooling economy. The one-year benchmark lending rate was trimmed by 40 basis points to 5.6 percent, while one-year benchmark deposit rates were lowered by 25 basis points; the move is effective from November 22.
“[Taking it at] face value, the rate cut is intended to keep Chinese monetary policy neutral. With inflation falling, the real interest rate is more or less unchanged from a year ago,” Bill Adams, Senior International Economist at PNC, told CNBC’s “The Rundown.” “We could possibly see additional easing in the coming months but i think it will be step by step [as] Chinese policymakers still feel fairly comfortable with the path their economy is on.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.