Bulletin

China slashes interest rates for third time in six months

China

The People's Bank of China has cut the one-year lending rate by 25 basis points to 5.1% - the third such reduction in China's benchmark interest rate in six months. Interest paid on money on deposit was also reduced by the same amount, with the central bank taking it down to 2.25%. Beijing is hoping to reboot economic growth by incentivising spending by £200bn. Official figures last week showed China's foreign trade fell by 10.9% on a year-on-year basis to 1.96trn yuan (£200bn) during the month. Consumer inflation rose by 1.5% in April compared with a year ago, below the expected 1.6% rate, while the producer price index recorded a 37th consecutive month of decline, falling 4.6%. The data reinforced expectations that 2015 is likely to see China's economy have the worst annual performance in 25 years, with GDP forecast to record 7% growth this year, down from 7.4% in 2014. Capital Economics expects to see other measures to lift the economy, including accelerating spending on infrastructure projects and other state investment.

 

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