Second Chinese Interest Rate Cut This Week

January 20, 2022

Officials at the People’s Bank of China, who on Monday of this week had cut their 1-year and 1-week interest rates by five and 10 basis points respectively, doubled down today with a reduction of another ten basis points in the 1-year loan prime rate to 3.70% as well as a 5-basis point cut of the five-year LPR to 4.60%. This month’s batch of Chinese data were generally weaker than forecast. Most alarming, real GDP growth on a year-on-year basis slowed to a six-quarter low of 4.0% in the final quarter of 2021. There is concern that growth, which averaged 9.2% per annum in 1989-2021, could decelerate to socially risky levels. A fresh threat is the emergence of the highly infectious, but less lethal, Omicron variant. China’s full-court press against any sign of Covid-19 is subjecting activities that require social gathering to containment measures that other governments around the world have been unwilling to tolerate in Omicron’s case.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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