China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside, stepping up efforts to cushion a stock market rout and deepening economic slowdown.
The one-year lending rate will drop by 25 basis points to 4.6% effective Wednesday. China’s central bank, People’s Bank of China said on its website Tuesday. The one-year deposit rate will fall by 25 basis points to 1.75%.
The acceleration of monetary easing underscores policy makers’ determination to meet China’s growth goal of about 7% in 2015. The risk of capital outflows and tighter liquidity after China devalued its currency on August 11, weaker-than-forecast factory activity, and renewed stock market weakness, added pressure for further stimulus.
The economy is still under immense downward pressure. Fiscal policy has to step up, and monetary policy is likely to play an assisting role by providing targeted liquidity.
–Yao Wei, China economist, Societe Generale
(With inputs from Reuters)
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