London Daily

Focus on the big picture.
Thursday, Oct 09, 2025

China unexpectedly cuts 2 key rates, withdraws cash from banking system

China unexpectedly cuts 2 key rates, withdraws cash from banking system

China's central bank unexpectedly cut a key interest rate for the second time this year and withdrew some cash from the banking system on Monday, to try to revive credit demand to support the COVID-hit economy.
Economists and analysts said they believe Chinese authorities are keen to support the sluggish economy by allowing a widening policy divergence with other major economies that are raising interest rates aggressively.

The People's Bank of China (PBOC) said it was lowering the rate on 400 billion yuan ($59.33 billion) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points (bps) to 2.75%, from 2.85%.

In a poll of 32 market watchers last week, all respondents had forecast the MLF rate would be left unchanged and 29 had predicted there would be a partial rollover.

"The rate cut surprises us," said Xing Zhaopeng, senior China strategist at ANZ.

"It should be a response to the weak credit data on Friday. The government remains cautious about growth and will not let go."

New bank lending in China tumbled more than expected in July while broad credit growth slowed, as fresh COVID flare-ups, worries about jobs and a deepening property crisis made companies and consumers wary of taking on more debt.

The PBOC attributed its move to "keep banking system liquidity reasonably ample". And with 600 billion yuan worth of MLF loans maturing, the operation resulted a net 200 billion yuan of fund withdrawal.

Market participants have largely priced in the partial rollover as the banking system was already flush with cash, with interbank money rates hovering at two-year lows and persistently below policy rates.

"Now with hindsight, today's 10-bp cut may be seen as 'front-loading' before the policy room gets narrower going forward as the PBOC sees structural inflation pressure," said Frances Cheung, rates strategist at OCBC Bank.

The PBOC reiterated it would step up the implementation of its prudent monetary policy and keep liquidity reasonably ample, while closely monitoring domestic and external inflation changes, it said in its second-quarter monetary policy report.

"Despite the warning of inflation risk and flush liquidity condition, the dominating downside risks under the COVID spread and property-sector rout prompted the PBOC to cut rates to stimulate demand," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

China's 10-year treasury futures jumped more than 0.7% in early trade following the rate decision, while yields on sovereign bond for the same tenor fell about 5 basis points.

The central bank also injected 2 billion yuan through seven-day reverse repos while cutting the borrowing cost by the same margin of 10 bps to 2.0% from 2.1%, according to an online statement.

The PBOC lowered both rates by 10 bps in January.

($1 = 6.7425 Chinese yuan)
Newsletter

Related Articles

0:00
0:00
Close
France: Less Than a Month After His Appointment, the New French Prime Minister Resigns
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Sarah Mullally Becomes First Woman Appointed Archbishop of Canterbury
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
US Prosecutors Gained Legal Approval to Hack Telegram Servers
Macron Faces Intensifying Pressure to Resign or Trigger New Elections Amid France’s Political Turmoil
Standard Chartered Names Roberto Hoornweg as Sole Head of Corporate & Investment Banking
UK Asylum Housing Firm Faces Backlash Over £187 Million Profits and Poor Living Conditions
UK Police Crack Major Gang in Smuggling of up to 40,000 Stolen Phones to China
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Trump Proposes Farm Bailout from Tariff Revenues Amid Backlash from Other Industries
FIFA Accuses Malaysia of Forging Citizenship Documents, Suspends Seven Footballers
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
A Dollar Coin Featuring Trump’s Portrait Expected to Be Issued Next Year
Australia Orders X to Block Murder Videos, Citing Online Safety and Public Exposure
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
OpenAI and AMD Forge Landmark AI-Chip Alliance with Equity Option
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
×