Loading ...China Unexpectedly Cuts Rates In Bid To Boost Economy, But Much More “Heavy Lifting” Needed
Just days after Beijing concluded its Third plenum with no major announcements, disappointing markets, early on Monday China unexpectedly cut its key short-term policy rate and the mortgage reference rates, its first such broad move since August last year. Analysts said the move just days after the conclusion of a high-level meeting that had focused on reviving the national economy represented “reactive easing.”
PBOC said it would cut the seven-day reverse repo rate to 1.7% from 1.8%, and would also improve the mechanism of open market operations. That is the first cut to the rate since August 2023.
“While [Monday’s] rate cuts offer some reassurance that policymakers are being responsive to the recent loss of economic momentum, the heavy lifting will need to come from fiscal, not monetary, policy,” said Julian Evans-Pritchard, head of China economics at Capital Economics. “Fortunately, the signs on that front are encouraging too.”