China surprises with key rate cuts

The People's Bank of China headquarters

The People's Bank of China (PBOC) decided on Monday to cut some of its key interest rates in an unexpected move aimed at boosting growth in the world's second-largest economy.

PBOC explained in its statement that it will reduce the seven-day reverse repo rate to 1.7% from 1.8% and pledged to improve the mechanism of open market operations.

In another statement, the central bank decided to reduce the main interest rate on the one-year loan prime rate (LPR) to 3.35% from 3.45%, as well as its five-year LPR to 3.85% from 3.95%.

This reduction in interest rates, described as “decisive,” reflected the bank’s insistence on reviving the economy, Xinhua News Agency reported, citing informed sources.

The move is in response to the objectives of the country’s top leaders’ meeting that was held last week and reaching the target growth rate this year at about 5%.