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Economic data disappoint, China unexpectedly cuts interest rates

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Economic data disappoint, China unexpectedly cuts interest rates

The Central Bank of China (PBOC) surprisingly cut two of its key interest rates in order to support an increasingly struggling economy amidst anti-Covid lockdowns, the real estate crisis and international turmoil. According to a statement released, the central bank lowered by 10 basis points, to 2.75% from 2.85%, on 400 billion yuan (59.33 billion dollars) of medium-term loans (Mlf, medium-term lending facility) in one year, against 600 billion maturing, for an operation that led to the draining of 200 billion.

PBOC also injected 2 billion yuan through seven-day reverse repos, while reducing the cost of borrowing by the same margin by 10 basis points to 2.0%, from 2.1% previously.

The Central Bank of China reiterated that it will step up the implementation of prudent monetary policy and maintain reasonably ample liquidity, while closely monitoring changes in domestic and external inflation, as reported in the second quarter monetary policy report.

“July data suggests the post-lockdown recovery has lost strength as the one-off push to reopen and the mortgage boycott triggered a new deterioration in the real estate sector,” said Julian Evans-Pritchard, senior Chinese economist at Capital. Economics -. The People’s Bank of China is already responding to these headwinds by strengthening support … But with credit growth proving less responsive to policy easing than in the past, this probably won’t be enough to prevent further weakness. economic “.

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