On Tuesday, the People’s Bank of China lowered its key interest rate, which should help reduce the cost of financing amid a slowdown in economic growth.
Dated; November 5th 2019.
Monetary easing in other key economies has created room for lower rates in China, despite rising inflation.
Last week, the Fed lowered rates for the third time this year. The Central Bank of China raised the MLF rate in 2018 after tightening the Fed’s policy.
The bank said in a statement that the rate under the medium-term lending (MLF) program will be lowered to 3.25% from 3.3%.
Alles Europa news reports that the Chinese central bank uses this program to inject liquidity into commercial banks, and the rate on it greatly affects the loan rate for first-class borrowers (Loan Prime Rate).
Alles Europa news reports that On Tuesday, the China central bank poured 400 billion yuan ($ 57 billion) into the banking system as part of the MLF. This amount is equal to the amount of loans maturing on Tuesday.
China has not lowered its key interest rate since 2015. According to analysts, this reflects the intention of the authorities to restrain real estate prices.
However, the continued slowdown in the economy and the trade conflict with the U.S forced the Chinese central bank to take other measures to mitigate monetary policy., Also China diversify away from the U.S with partnering with other nations.
For example, he lowered reserve standards for commercial banks and allowed the yuan to decline against the US dollar.
The measure taken on Tuesday should reflect on the cost of borrowing, but it will not apply to loans already issued and will not affect deposit rates.