China's central bank said Friday it is cutting interest rates for the sixth time since last November in a bid to slow the contraction of its economy and maintain stable credit growth. In addition, the People's Bank of China (PBOC) is cutting its one-year lending rate from 4.6 percent to 4.35 percent and lowering the one-year deposit rate from 1.75 percent to 1.5 percent, the Wall Street Journal reported.
Reuters reported that the past year has seen the most aggressive series of actions loosening policies in China since the 2008 international economic crisis. All measures, including eliminating a cap on deposit rates, are to take effect Saturday and reflect the government's determination to lower the cost to businesses of borrowing and make it easier for banks to lend.
"Chinese officials are stepping on the gas," Frederic Neumann, co-head of Asia Economics Research at HSBC Holdings PLC, told Bloomberg. "The joint move on interest rates and the reserve-requirement ratio shows that Beijing is determined to get the car out of the mud and get things moving again."
The PBOC will reduce commercial banks' so-called reserve requirement ratio by 0.5 percent percentage points. The upshot for big banks will be a reserve ratio of 17.5 percent. That ratio, which has been cut four times so far this year, is the minimum fraction of customer deposits and notes that must be held as reserves. Lowering that ratio frees up bank reserves for lending.
Friday was the sixth time in the past year that the Bank of China has lowered its rates, Reuters reported.
The moves, which are similar to measures being taken by the European Central Bank, are part of the PBOC's efforts to raise a troublingly low inflation rate and keep growth in the world's second-biggest economy from slowing. China said Monday that the increase in its gross domestic product for the three months ended last month fell to 6.9 percent -- the weakest such expansion in six years.
"At present, the domestic and international situation is still complex," the PBOC wrote in Chinese on its website, noting that downward pressure on China's economic growth remained. It noted a "need to continue the flexible use of monetary policy tools to strengthen preset tuning, to create a favorable monetary and financial environment for economic structural adjustment and stable and healthy economic development."