The People's Bank of China (PBOC) recently reduced two key policy rates, indicating a forthcoming decrease in the country's benchmark lending rates. The central bank injected a significant amount of liquidity into the economy, providing 401 billion yuan ($55.24 billion) via the one-year medium-term lending facility. The interest rate for this facility was lowered to 2.50% from the previous 2.65%. Additionally, the PBOC offered CNY204 billion in funds through seven-day reverse repurchase agreements at an interest rate of 1.90%, down from 1.80% previously.
This latest rate cut follows a similar 10 basis point reduction made by the PBOC in June, which successfully influenced lower benchmark loan rates. These recent moves by the central bank reflect the concerns surrounding China's slowing economy and the need for substantial policy support to stimulate growth.
Economists caution that such interest-rate cuts could potentially widen the yield gap between China and the United States, putting further pressure on the yuan. However, a senior official from China's central bank assures the public that a range of monetary-policy tools, such as reserve requirement ratio cuts, open-market operations, and medium-term lending facilities, will be utilized flexibly to ensure sufficient liquidity within the country's banking system.
Overall, these developments signify China's proactive measures to address economic challenges and maintain stability in the financial sector.
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