David Tepper of Appaloosa Management said it best a week ago, there are four Fed’s in the world today, the US is printing money, Europe has begun its own QE, Japan has it’s own QE and now China has joined the party with their latest round of interest rate cuts.
The People’s Bank of China will reduce the one-year lending rate 0.25 percentage point to 5.1 percent, and cut the one-year deposit rate by the same amount to 2.25 percent, effective Monday, the central bank said on its website Sunday. In another step to free up interest rates, the central bank will also raise the limit on what banks can pay savers.
“This asymmetric interest rate cut is meant to lower firms’ funding costs further while leaving the deposit rate not much changed with a view to keep it attractive enough so as to avoid large deposit outflows to the stock market,” Liu Li-Gang, an analyst at Australia & New Zealand Banking Group Ltd., said by e-mail. “This also shows that the PBOC intends to speed up interest rate liberalization.”