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China Cuts Interest Rate for the First Time in Nearly Two Years

China's central bank cut its interest rate on 700-billion-yuan ($110.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points from 2.95% to 2.85%, according to news reports.

While prices have remained stable for China, policymakers are likely to shift their focus toward boosting growth, Bloomberg said. Some market analysts expect more policy easing this year to mitigate an economic slowdown, Reuters reported.

According to a recent Reuters poll, 34 out of 48 traders and analysts, or 70% of all participants, predicted no change to the MLF rates in January. The rate cut is part of Beijing's efforts to support growth in a crucial year of leadership transition for China's economy, following a 4% rise for gross domestic product last quarter from a year earlier—the weakest since early 2020. Bloomberg reported.

"The PBOC's decision to ease early in January suggested that economic downward pressure intensified at end-2021 and room for improvements in the first quarter of this year is not huge," said Ken Cheung, chief Asian FX strategist at Mizuho Bank, per Reuters. More easing measures are expected this year.

—Bryan Mason, editorial associate
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Friday, 20 May 2022