China cuts key policy rate to support economy after weak trade and inflation data, with ‘wider easing’ to follow
- The People’s Bank of China cut the seven-day reverse repo from 2 to 1.9 per cent on Tuesday when it sold 2 billion yuan (US$280 million) of the liquidity tool
- The move came as the market has joined calls for more policy easing following weak trade and inflation figures
China’s central bank cut a key policy rate on Tuesday in a clear signal of monetary loosening to support the struggling national economy, a move which could trigger “wider easing”, analysts said.
The seven-day reverse repo rate, a widely used liquidity injection tool, was cut from 2 to 1.9 per cent when the People’s Bank of China (PBOC) sold 2 billion yuan (US$280 million) worth of the tool.
This is clearly a loosening signal
Leading investment banks, such as Citic Securities, said earlier that China had entered a window of economic stabilisation, and were expecting policy rate cuts to bolster the post-coronavirus recovery.
“This is clearly a loosening signal,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.
Ding expects subsequent cuts of the medium-term lending facility (MLF) and also the loan prime rate, which is partly linked to mortgage loans.
