Coordinated moves this seem to have been!
Just a few minutes back the Bank of England initiated the next wave of credit 'quantitative' easing policies, now comes China.
From the Marketwatch.com,
The People's Bank of China cut its benchmark lending and deposit rates late Thursday, its second rate cut since early June, according to reports. The Chinese central bank lowered its one-year yuan deposit rate 25 basis points and its one-year lending rate by 31 basis points, according to Dow Jones Newswires. The central bank also announced more relaxed rules on lending, allowing bank lending rates to fall to 70% of the benchmark rate, down from 80% currently.
So China’s political authorities have remained interventionists after all.
I believe that the People’s Bank of China’s (PBoC) response may have been triggered by today’s clobbering of her already beaten down equity markets. The Shanghai index fell by more than 1%.
It is also possible that global central bankers may have decided to coordinate or synchronize their “kick-the-can-down-the-road” responses.
If China’s banks and businesses have been stuffed with bad loans, then interest rates cuts may not be effective. So the next measures will either be asset purchases (ala developed economies) or fiscal stimulus.
BUT we will observe the reaction of China’s financial markets and the commodity markets to these measures.
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