The central bank called for better coordination of global macro policies, while re-emphasising it will keep liquidity sufficient to help with the real economy and watch out for inflation risks/Bloomberg
by BloombergThe People’s Bank of China (PBOC) has slushed the interest rate it charges on loans to banks by the biggest amount since 2015, as the authorities ramp up their response to the worsening economic impact from the coronavirus pandemic.
The Chinese central bank reduced the interest rate on the seven-day reverse repurchase agreements to 2.2 per cent from 2.4 per cent as it injected CNY 50 billion ($7.1 billion) into the banking system. The central bank said this will keep liquidity sufficient to help the real economy.
The first cut to a PBOC policy rate since February 2020 is in line with a pledge by the government to increase support to the economy through increased sales of sovereign debt, as domestic and international demand slumps due to COVID-19 pandemic.
Furthermore, a reduction in the central bank’s main tool to adjust the price of market liquidity also signals coming reductions in its main one-year funding tool, and potentially a corresponding cut to the benchmark deposit rate.
Reductions to policy rates should also be reflected in the main market benchmark of the cost of lending to companies, the loan prime rate.
China will increase its fiscal deficit as a share of gross domestic product, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilise the economy.
PBOC also called for better coordination of global macro policies, while re-emphasising it will keep liquidity sufficient to help with the real economy and watch out for inflation risks.
MOST READ
ECONOMY
Refinitiv partners with Complyfin in the UAEECONOMY
Jordan agrees $1.3 billion IMF programmeECONOMY
Expo 2020 Dubai to contribute 1.5 per cent to...ECONOMY
US and China sign phase one of the trade...ECONOMY
Sharjah announces AED 29.1 billion 2020 budgetECONOMY
Turkish lira falls as regulator intervenesECONOMY
Saudi Arabia to invest much of its Aramco IPO...
CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.
Loading More post
