China cut interest rates for the third time in six months on Sunday in a bid to lower companies’ borrowing costs and stoke a sputtering economy that is headed for its worst year in a quarter of a century. Analysts welcomed the widely-expected move, but predicted policymakers would relax reserve requirements and cut rates again in the coming months to counter the headwinds facing the world’s second-largest economy.
The People’s Bank of China (PBOC) said on its website it was lowering its benchmark, one-year lending rate by 25 basis points to 5.1 percent from May 11. It cut the benchmark deposit rate by the same amount to 2.25 percent. “China’s economy is still facing relatively big downward pressure,” the PBOC said.
“At the same time, the overall level of domestic prices remains low, and real interest rates are still higher than the historical average,” it said. Sunday’s rate cut came just days after weaker-than-expected April trade and inflation data, highlighting that China’s economy is under persistent pressure from soft demand at home and abroad.