In surprising move, China cuts interest rates
Beijing, China (4E) – In an unexpected move Thursday, China’s central bank announced a rate cut in hopes of egging on its sluggish economy.
The People’s Bank of China cut a quarter percentage point off of its deposit and lending interest rates.
Investors had been hoping for some kind of action by the Chinese government to stimulate the economy, but Thursday’s cut was a surprise.
China’s one-year lending rate now sits at 6.1 percent. The rate is substantially higher than interest rates in the United States, Europe and Japan.
China is now the world’s second largest economy behind the United States. A slowdown in China has caused jitters among economists and investor worldwide.
A purchasing managers’ index report in early June revealed that Chinese manufacturing slipped in May for the seventh consecutive month. The index dipped to 48.4 in May from 49.3 in April. A reading above 50 indicates growth in the sector.
In addition, Chinese exports have been hit by the European sovereign debt crisis, which has caused 11 countries there to stumble into a recession hurt by demand from China’s largest market.
Unlike the central banks in the United States and Europe, the People’s Bank of China does not have scheduled rate announcements.
The announcement came before the markets opened in the U.S., causing futures to spike.
Asian markets, which had already closed, will have to wait until Friday to react to the news.