The People’s Bank of China cut interest rates today:
- The People’s Bank of China announced cutting the 7-day reverse repurchase rate to 1.70% from 1.80%.
- The last seven-day federal funds rate cut was in August 2023, when it also cut the seven-day federal funds rate. None of them were cut by 10 basis points.
Main LPR rates now:
The one-year interest rate has been reduced to 3.35%.
The five-year rate has been reduced to 3.85%.
Spending cuts were not widely expected. But they come after another round of weak data:
- Q2 GDP Weaker Than Expected
- Consumer inflation is heading back towards deflation
- soft PMI
Debt remains a heavy burden on the real estate sector, which in turn affects consumer spending.
The policies issued by the People’s Bank of China represent efforts to support pro-growth policy, in line with the message that came out of the plenary session held last week.
While fears of a yuan collapse have been a deterrent to the PBOC’s rate cuts, with expectations now growing for a near-term Fed rate cut, expected in September, the PBOC appears to believe it has room to ease rates now without threatening the yuan too much.
Update on CNH, down during the session, but not a big move