China Cuts Policy Interest Rate For First Time Since April 2020

(Bloomberg) — China lowered a key interest rate for the first time since the peak of the pandemic in 2020 as a property-market slump and repeated virus outbreaks dampened the nation’s growth outlook.

The People’s Bank of China cut the rate on its one-year policy loans by 10 basis points to 2.85%. That’s the first reduction since April 2020. It also slashed the rate on the seven-day reverse repurchase agreements by the same magnitude to 2.1%.

The central bank made the move while offering 700 billion yuan ($110 billion) via the medium-term lending facility, exceeding the 500 billion yuan coming due. It added 100 billion yuan with seven-day reverse repos.

Speculations on potential monetary support from the PBOC have been growing after it vowed in December to take “proactive” action to support the economy. China’s move to ease policy contrasts with expectations for quicker rate hikes in the U.S. amid rising inflation.

All but three of the 10 economists surveyed by Bloomberg had forecast the rate on the one-year MLF remaining unchanged. Eight expected a full rollover of the policy loans.

©2022 Bloomberg L.P.

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