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Published on Monday, March 2, 2015 | Updated on Tuesday, March 3, 2015

The PBoC cut interest rate amid dubious signals of growth recovery

Again, the People’s Bank of China (PBoC) cut the benchmark interest rates last Saturday, the second time since November 2014 and effective from March 1st. Although both the one-year benchmark lending and deposit rates were trimmed by 25 bps (to 5.35% and 2.5% respectively), the PBoC further expanded the permissible floating range of customer deposit rates to 30% (versus 20% previously) above the benchmark rates, which, as a result, only modestly reduces the one-year customer deposit rate to 3.25% from 3.3% previously. This move has constituted an additional step in interest rate liberalization and reaffirms the authorities’ resolution to push for structural reforms.

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