China has fired the opening salvo of a series of interventions which I expect from global central bankers.
From Bloomberg.com
China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth.
The benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year deposit rate will fall to 3.25 percent from 3.5 percent. Banks can also offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent…
Today’s move signals policy makers are concerned that the cost of borrowing is crimping companies’ spending and holding back expansion in the world’s second-biggest economy. Three bank officials told Bloomberg News last month that the nation’s biggest banks may fall short of loan targets for the first time in at least seven years as demand for credit wanes.
Slowdown Worsening
The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.
The next thing is to observe the reaction of China’s financial markets and the prices of global commodity markets, particularly gold, over the coming days.
If these cuts won’t stop the bleeding as with bank reserve requirements, then we can expect more cuts to come.
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