In a surprising move, China’s central bank has cut key policy rates for the second time in three months. This indicates that the government is increasing its efforts to boost the struggling economy.
The People’s Bank of China (PBOC) announced a 15 basis point reduction in the rate on 401 billion yuan worth of one-year medium-term lending facility (MLF) loans. The rate has now been lowered to 2.5% from the previous 2.65%.
A majority of market watchers predicted that the central bank would leave the MLF rate unchanged, but the unexpected rate cut has taken them by surprise.
In addition to the rate cut, the PBOC also injected 204 billion yuan through seven-day reverse repos, while reducing borrowing costs by 10 basis points to 1.8%.
The PBOC had previously lowered key policy rates in June to support the broader economy, but recent data suggests that the economy is still struggling.
The current exchange rate is $1 = 7.2585 Chinese yuan.
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