China Cuts Policy Rate and Reserve Requirement Ratio to Boost Economy

China's central bank, the People's Bank of China (PBOC), took measures on Friday to stimulate the country's slowing economy. The PBOC reduced the interest rate on 14-day reverse repurchase operations from 2.15% to 1.95%. This move aims to encourage more lending and stimulate economic growth. Additionally, the central bank injected 34 billion yuan ($4.67 billion) worth of liquidity through the policy mechanism, marking the first time since January that such action has been taken.

In June, the PBOC had already lowered the interest rate on seven-day reverse repos as a way to guide down the lending rates offered by commercial banks in the country. The recent decision to cut the reserve requirement ratio for commercial banks by 0.25 percentage points further shows the government's commitment to boosting lending and supporting economic activity.

Despite these measures, the central bank decided to keep the interest rate on seven-day reverse repos unchanged at 1.80% on Friday. It also maintained the interest rate of its one-year medium-term lending facility at 2.5% while injecting CNY591 billion worth of liquidity through this tool.

As China faces increasing signs of economic slowdown, these actions by the PBOC aim to provide a much-needed boost and support continued growth.