China's Central Bank, the People's Bank of China (PBOC), made a surprise move on July 22, 2024 by cutting its seven-day reverse repo rate by 10 basis points to 1.7%. This decision was aimed at optimizing the open market operation mechanism and increasing financial support for the economy (Bloomberg, Yahoo Finance).
Following this announcement, Chinese banks lowered their main benchmark lending rates, or loan prime rates, by 10 basis points each. The PBOC's move was in line with the policy direction set during the Third Plenary meeting of the Chinese Communist Party (Yahoo Finance). The focus of authorities is on reviving domestic demand while implementing supply-side reforms (Yahoo Finance).
The PBOC's decision to cut interest rates came after recent signs of a slowing economic recovery in China. Economists had been expecting more stimulus measures from Beijing, especially following softer-than-expected data for the second quarter and a series of middling economic reports (Investing.com).
The one-year loan prime rate was cut to 3.35% from 3.45%, while the five-year rate, which is used to determine mortgage prices, was lowered to 3.85% from 3.95%. The cuts are expected to have a significant impact on the property market, which has been struggling with a prolonged downturn over the past four years (Investing.com).
The PBOC's decision to cut short-term interest rates was made in an effort to support the economy and boost growth. The move follows similar actions taken by other central banks around the world, as global economic conditions remain uncertain (Bloomberg).
