The PBOC said it will cut interest rates from the current level of 1.5% “at an appropriate time” in 2025, the FT reported. The central bank will also streamline its monetary policy in adopting a more singular means of adjusting interest rates over its current practice of setting multiple rates for different sectors.
A shift in the PBOC’s policy stance comes as China grapples with sluggish economic growth, with lower interest rates and steady liquidity measures having so far provided little support to the economy.
Slowing growth has also furthered the case for monetary policy reform in the country, especially as credit demand slumped amid a property market slowdown over the past three years.
The PBOC steadily trimmed its bank reserve requirement ratio and its loan prime rates over the past two years. But the moves provided limited support to the economy.
This trend is also expected to drive the PBOC’s policy shift towards a more streamlined, market-centric approach to interest rates.
The central bank had signaled last year that its main policy instrument will be the seven-day reverse repo rate.
Source: Economy - investing.com
