According to Bloomberg the surprise decision by China’s
central bank to cut interest rates on June 7 shows increasing nervousness about
the state of the economy. While most economists were predicting a rate
reduction sometime this year, the suddenness of this latest move reveals just
how antsy China’s officials are getting.
….The People’s Bank of China, China’s central bank,
announced it was cutting its benchmark interest rates by 25 basis points, with
12-month lending rates falling from 6.56 percent to 6.31 percent and deposit
rates dropping from 3.5 percent to 3.25 percent. Although reserve ratio
requirements for Chinese banks have already been reduced three times since last
November, today’s cut is the first time China has moved interest rates since
raising them (also by 25 basis points) last July…
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