 "People walk past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, China. Source: REUTERS/FILE.")
China, which has been witnessing economic slowdown, is finding all possible ways to boost its finances. The country’s central bank on Monday, lowered a short-term policy rate and injected more liquidity into the system.
On its website, the People’s Bank of China announced cutting the 14-day reverse repurchase interest rate by 10 basis points to 1.85 per cent from 1.95 per cent, and injected 74.5 billion yuan, equivalent to $10.6 billion, of liquidity via the policy tool.
The bank has also pumped in 160.1 billion yuan through 7-day reserve repo agreement, keeping the interest rate unchanged at 1.7 per cent.
The decision to lower the 14-day rate came ahead of the National Day Holiday that will last seven days from October 1. China’s central bank usually offers 14-day loans ahead of a long break. The last time it provided such lending was in February ahead of the week-long Lunar New Year break.
The announcement of rate cut was made soon after it was said that China’s central bank governor Pan Gongsheng will be holding a rare press briefing on Tuesday (September 24) along with two other officials, fueling speculation authorities are gearing up to increase efforts to revive growth.
Recently, China’s central bank signaled that it was preparing additional policies.
In August, there were a number of disappointing data in August which raised concerns that China could miss its annual growth target of around 5 per cent without more support.
What experts say?
Monday’s rate cut has reflected a catch-up with a 10-basis-point July cut in the 7-day rate, easing measures were likely imminent, a report by The Washington Post quoted Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
Impact Shorts
More Shorts“I do expect PBOC will cut 7-day repo rate as well as the reserve requirement ratio in the coming months,” Zhand said, adding: “There is a press conference tomorrow when the financial regulators will shed light on their policy stance.”
“A 10bp cut alone is not sufficient to arrest the falling economic momentum,” a report by Bloomberg quoted ANZ Chief Greater China Economist Raymond Yeung as saying.
“A bigger package is needed. Other policy measures in the tool box such as RRR cut, MLF cut and mortgage rate cut will likely be announced," Yeung further said.
As per Bloomberg report, China has another chance to lower the cost of its one-year policy loans on Wednesday.
With inputs from agencies.