China’s central bank lowered the rate on its one-year medium-term lending facility (MLF) loans by 15 basis points to 2.5% Tuesday, from 2.65% earlier, in an effort to bolster its economy that is witnessing a bumpy recovery.
The unexpected key policy rate cut was the second one announced in three months by the People’s Bank of China (PBOC). A reduction in the short-term policy rate by 10 basis points was also announced.
The central bank's announcement followed a series of sluggish data indicating that the country is facing fresh economic woes.
Recent data from China showed the consumer sector in the country fell into deflation, and factory gate prices extended declines in July, raising concerns about fuel demand in the world’s second-largest economy.
On August 8, customs data showed that exports plunged 14.5% year-on-year in July, China’s most significant drop in shipments since February 2020, while imports fell 12.4%.
Similarly, data released earlier this month showed the country's manufacturing activity contracted for a fourth straight month in July, with its official manufacturing sector purchasing managers’ index (PMI) coming in at 49.3, marginally above June’s reading of 49, but still in contraction territory.
