China cuts benchmark interest rates again

In what is becoming a habit China’s People’s Bank of China (PBOC) has cut benchmark one-year interest rates.

In statement posted on its website on Sunday evening local time the PBOC lowered one-year lending rates by 0.25% to 5.10% effective Monday, May 11. The move, following a similar reduction on February 28 this year, will “support the healthy development of the economy”.

Alongside the rate reduction, the PBOC also decreased deposit rates by 0.25%, lowering the benchmark one-year rate to 2.25%. However, in a further sign of increased rate liberalisation, the bank increased the maximum ceiling on benchmark deposit rates from 130% to 150%. This means the highest effective deposit rate, previously 2.925%, has increased to 3.375%.

The reduction in interest rates follows the release of benign inflation data on Saturday with consumer and producer price inflation both undershooting expectations in April.

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