China unexpectedly cuts policy rate amid Covid-19 lockdown.
The People’s Bank of China has cut its benchmark five-year lending rate to 4.45% from 4.6%. This is the biggest cut since the rate was introduced into the bank’s policy arsenal in 2019.
The move represents an unexpected turnaround in China’s monetary policy.
Economists believe the rate change will provide temporary relief for the struggling property sector, but limited help for the slowing economy.
In addition to weaker consumer demand, capital outflows from Chinese capital markets reached record levels in the first quarter. China needs to restore economic growth quickly or these outflows could lead to a situation like in 2015, when the yuan collapsed and Chinese assets were dumped by investors.
TFC POV: The question is how will China affect the US equity markets. We expect more stimulation in the global stock market as the Chinese may start to move their money into multiple capital markets and not to forget, the revenge-spending.