China cuts key liquidity rate after 2015

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China’s central bank cuts  a key interbank lending rate on Monday, the first easing in the liquidity tool in more than four years this could be the indication theoretically of  slowing growth.

The People’s Bank of China (PBOC) on their website said

It was lowering the seven-day reverse repurchase rate to 2.50% from 2.55%.

The move cheered China’s bond market and comes just two weeks after the PBOC cut the borrowing cost on its medium-term lending facility (MLF) loans by the same margin.

Reuters reported that

Zhou Hao, economist at Commerzbank in Singapore said the reverse repo rate cut indicates a policy change in coming months, including “some fine-tuning to prioritise the pro-growth policy for the time being.” Driven by soaring pork prices from the spread of African Swine Fever, China’s consumer inflation rose past the government’s target of around 3% in October to its fastest pace in almost eight years, posing a dilemma for the PBOC.

“I expected an easing move from the PBOC, just didn’t know when,” said a Hong Kong-based portfolio manager. “The (high) Consumer Price Index (CPI) was only pig CPI. Everything else is in big trouble.”

further the reaction in Indian market seen with this news The Nifty inched up by 20 points after the news release.

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