US Fed cut may prompt China to lower its policy rate in 4 years: Report

International News

China's central bank could cut its benchmark policy rate for the first time in four years if the US Federal Reserve delivers a widely expected cut in late July, analysts say, as Chinese policymakers step up support for the slowing economy.
Market watchers, however, believe the People's Bank of China (PBOC) is more likely to follow any US rate cut by lowering its key short-term money market rates.
It would not be the first time the PBOC has followed the Fed's lead. In 2017 and 2018, the bank raised short-term money rates hours after U.S. hikes, although in more modest and symbolic moves of 5 to 10 basis points.
While Chinese officials continue to downplay the likelihood of more aggressive easing, the economy has been slow to respond to a host of earlier stimulus measures, while the US-China trade war is growing longer and costlier.
Some analysts believe GDP growth is nearing the lower end of the government's 2019 target range of 6-6.5%, reinforcing expectations that more support is needed soon.
In a bid to spur more lending, the PBOC has injected huge amounts of liquidity into the financial system in various forms over the past year, targetting small and private companies in particular. It also has quietly guided some short-term rates lower to reduce corporate financing pressure.

 But analysts say that has not jumpstarted investment as much as planned, as the uncertain business outlook leaves companies wary of making the fresh investments needed to steady the economy. They say a system-wide cut in interest rates may offer struggling firms more immediate relief...Read More