- George Magnus, a senior independent economic adviser to UBS Group AG
The People Bank of China cut interest rates for the sixth time in less than a year, and it lowered the amount of cash that banks must hold as reserves in an attempt to kick-start growth in its slowing economy. The central bank lowering the one-year benchmark bank lending rate by 25 basis points to 4.35%, effective from October 24. The one-year benchmark deposit rate was also cut by 25 basis points to 1.50%. Reserve requirements for all banks were slashed by 50 basis points, with an additional 50 basis point reduction for some institutions.
The expansion of the monetary easing underscores Beijing's determination to meet its 2015 growth target of about 7% in the light of deflationary pressures, overcapacity and sluggish global demand. China's sixth rate cut since November comes as the European Central Bank President signals more policy easing and amid expectations for extra stimulus from the Bank of Japan. China's gross domestic product increased 6.9% in the three months through September from a year earlier, according to the National Bureau of Statistics, overshooting economists' estimates for 6.8%. With consumer inflation at about half of Beijing's target and a persistent slump in producer prices, policy makers had room for additional easing.
© Dukascopy Bank SA