China cuts policy interest rate by 25 basis points

(MENAFN) The People's Bank of China (PBOC) announced a reduction in its policy interest rate by 25 basis points, bringing it down to 3.1 percent, as stated in an official announcement on Monday. This move comes amid market expectations, which had forecasted a one-year loan prime rate of 3.15 percent during the bank's meeting. The recent cut follows a previous decrease in July when the rate was lowered from 3.45 percent to 3.35 percent, and it has remained unchanged during the last two meetings.

In addition to the policy rate cut, the PBOC also reduced the five-year loan prime rate by 25 basis points, setting it at 3.6 percent. This decision is aimed at revitalizing the real estate and credit markets, particularly in light of the ongoing contraction in the real estate sector. By easing interest rates, the bank hopes to alleviate financial pressures on both individuals and businesses, fostering economic activity in these critical areas.

Recent growth figures for the third quarter, released last week, indicated that China's economy has not met the government's growth targets for the year. In the third quarter of 2024, the economy grew by 4.6 percent compared to the same period last year. This growth rate highlights the challenges facing the Chinese economy, prompting the PBOC's decision to implement interest rate cuts as a strategic response.

Overall, the adjustments in interest rates reflect the PBOC's efforts to stimulate economic growth and support struggling sectors within the economy. With the reduction in borrowing costs, the bank aims to encourage lending and investment, which are vital for a sustainable recovery in the wake of economic headwinds.

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