- The Peoples Bank of China (PBoC) today cut its leading interest rates. The one-year benchmark deposit rate was cut by 25bp to 2.75 pct and the one-year benchmark lending rate was cut by 40bp to 5.6 pct. As the lending rates have largely been liberalized, the one-year depot rate is now the most important of the two benchmark interest rates.
- The implication of today’s interest rate cut is that the Chinese growth manufacturing PMIs and growth have probably bottomed out and should start to improve in Q1 when investment demand and particularly the property market will start to rebound.
- The interest rate cut is particularly important for the property market where the 40bp cut in the benchmark lending rate is still important for mortgage interest rates.
“The growth outlook is definitely more positive for H1’15. However, we do not expect to see a sharp rebound in growth next year as the government will still be focused on managing financial risk and securing sustainable credit growth. Hence, the PBoC will continue to ease only cautiously and we do not expect it to cut rates further”, Danske Bank quoted in a report on Friday.
The material has been provided by InstaForex Company – www.instaforex.com