The central bank of China cuts interest rates and reserve requirement ratio for banks

The central bank of China cuts interest rates and reserve requirement ratio for banks

China’s central bank late on October 23, 2015 cut both interest rates and the reserve-requirement ratio for banks, in a bid to revive slowing economic growth

The central bank also scrapped its cap on deposit rates for China’s commercial lenders and rural cooperatives, a key move toward the government’s long-promised interest-rate liberalization.

The People’s Bank of China said in a statement that it will cut its benchmark lending and deposit rate by 0.25 percentage point. After the cuts, China’s benchmark one-year lending rate will be 4.35 %, down from 4.6 %, and the one-year deposit rate will be 1.5 %, lowered from 1.75 %, effective as of October 24, 2015.

This is the sixth cut in benchmark interest rates since November last year.

Meanwhile, the PBOC said it would also lower its reserve-requirement ratio for banks by 0.5 percentage point, also effective October 24, 2015, in a bid to boost liquidity and maintain stable credit growth. The official reserve-requirement ratio for most large banks will fall to 17.5 % after the cut takes effect.

The central bank said there would be an extra 0.5 percentage point cut in certain banks’ reserve-requirement ratio, in a bid to support the country’s small businesses and agricultural sector.

This is the fourth across-the-board reserve-requirement-ratio reduction so far this year.

www.wsj.com


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