China’s central bank decided to reduce a key interest rate amid the decline in the property market and the resurgence of coronavirus cases, marking the first cut since the pandemic peaked last year.
- The People’s Bank of China lowered its one-year policy loan rate by ten basis points to 2.85%, the first-rate cut in nine months since April 2020. It also reduced the seven-day reverse repurchase rate to reflect a net injection of 200 billion yuan into the financial system.
- Analysts believe the move to accelerate the policy easing is in efforts to lower borrowing costs and push higher credit activity and suggests that China’s economy is “weak” and will drive borrowing costs significantly lower.
- The development is in line with a commitment made in December to continue supporting the economy, but contrary to other central banks which are moving to normalize their respective policies to address the inflationary uptick.
The 10-year government yield slipped by two basis points to 2.78%, while the overnight repo rate fell by six basis points.
MCHI is down 0.11% premarket.
Source: Bloomberg
