The People’s Bank of China surprisingly cuts by ten basis points to 2% of the rate applied to home purchases
In Europe and the United States, the central banks (the Fed and the ECB) are starting their policy of raising interest rates with the aim of halting the incessant rise in inflation. On the other hand, China has the opposite problem: consumption has not been reactivated after the pandemic and the real estate sector, one of the most important in the country, is going through a critical moment.
For this reason, the People’s Bank of China (PBC) has taken a surprise decision to scrap two of its main references for loans from the country’s banks. The aim, according to a statement from BPC, is “to maintain reasonable and sufficient liquidity in the banking system. In this way, they will try to cope with the slowdown in economic growth and the difficulties of the banking sector.
China’s economy slowed in the second quarter, growing just 0.4%, its slowest pace in two and a half years, as a result of strict lockdowns following the ‘covid zero’ policy. This policy has been particularly harsh in recent months in Shanghai, the country’s financial heart, with its port – the largest in the world – practically closed.
In particular, the Bank of China has cut the rate on seven-day reverse repurchase transactions (repos) by ten basis points from 2.10% to 2%, while reducing the rate on one-year medium-term loans. .
For example, the bank injected 400,000 million yuan (57,791 million euros) through the medium-term loan, bearing an interest rate of 2.75%, while conducting a reverse refinancing operation for another 2,000 million yuan (289 million euros) up to seven days.
Capital Economics Senior China economist Julian Evans Pritchard called the interest rate cuts announced by the People’s Bank of China a “surprise,” although he believes they will “make little difference to liquidity conditions.” In his view, the central bank’s main driver is to “trigger a reduction in the prime rate for loans” (LPR), set based on rates linked to the medium-term interest rate, which will reduce interest payments on existing loans. , ” relieving the pressure on indebted companies” and easing the cost of new loans.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
