The People’s Bank of China just cut interest rates to combat the country’s slowing economic growth and sluggish inflation.
The reserve-requirement ratio (RRR) was cut by 0.5 points.
That brings the requirement, which is an important measure of how much money Chinese banks are able to lend, to 17.5%. Cuts to the RRR are designed to free up the banking system to lend more.
There’s a good explainer on that here, from FT Alphaville.
The benchmark interest rate was cut by 0.25%, bringing it down from 4.6% to 4.35%.
Stocks exposed to commodity prices are booming on the news — troubled miner Glencore shot up by as much as 10% in the immediate aftermath. The recent plunge in commodities is partly due to weaker demand from China, and rate cuts are seen as a positive move in giving the economy a boost.
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