China’s First Rate Cut Since 2012 Aimed at Boosting Growth

The People’s Bank of China is cutting its one year deposit rate to 2.75% from 3.0% to try to revive the flagging economy.

The cut, which took the markets by surprise, was the first since 2012, and comes into effect on Saturday.

The one-year lending rate will also be reduced from 6% to 5.6%.

On Thursday figures showed China’s factory output contracting for the first time in six months.

Economic growth slowed to a five-year low of 7.3% last quarter.

Many economists had expected China to stimulate economic growth through fiscal spending rather than lowering rates.

To offset the effect of lower rates on savers the bank said it would give banks the flexibility to offer higher deposit rates, up to 1.2 times the benchmark level, rather than 1.1 times.

via BBC

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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