In its effort to push the economy, the People’s Bank of China just cut its lending rate by 31 basis points to 6 per cent, and deposit rate by 25 basis points to 3 per cent.
This follows on increasing talks of a Chinese hard-landing stemming from what can at best be characterised as a mixed-bag of economic data.
According to this chart from Thomson Reuters Datastream, during slowdowns, a Chinese rate cuts seem to correspond with revivals in growth. The most dramatic corresponding moves are seen after Lehman’s collapse.
The chart also shows the correlation between Chinese inflation rates and GDP growth.
Photo: Thomson Reuters Datastream