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Interest Rates to be Cut to Bolster Economy during Slide in Growth

Interest Rates to be Cut to Bolster Economy during Slide in GrowthInterest rates is cut for the second time in just two months by China’s central bank as a plan to bolster an economy that is expected to record its sixth successive slide in growth. China announced the rate cut when the Bank of England also launched a third round of monetary stimulus and at the same time the European Central Bank cuts its main interest rate.

The benchmark lending rates will be lowered by 31 basis points to 6 percent at the same time deposit rate will be cut by 25 basis points to 3 percent as policymakers are trying to combat the impact of the debt crisis on the world economy. The cuts will take effect today with the last cut in interest rate was on June 7.

The central bank have also liberated interest rate by lowering the floor for lending to 70 percent from the previous rate of 80 percent. China will also be released data next week that covers the second quarter and the month of June. Several economists are expecting the data to show the country’s economy to expand from the second quarter by 7.6 percent from the year earlier that was considered its weakest performance since the 2008-2009 financial crisis.

China has also lowered the cash reserve in cash banks in three 50 basis point steps, freeing up to 1.2 trillion yuan for fresh lending. The European Central Bank will also cut its benchmark interest rates to its lowest level, which is said to be the most aggressive move to unblock the flow of credit and prevents deterioration of the euro.



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