Wang Tao, chief China economist for UBS AG (UBSN), comments on China’s decision to cut interest rates for the first time since 2008.
“May data are likely to be pretty bad, particularly industrial production may be still below 10 percent year-on- year.”
The interest rate cut “should help alleviate the interest burdens of corporate and government sectors. Mortgage rates will be adjusted lower accordingly, which should help home buyers.”
“The symmetric rate cut leaves room for asymmetric moves. In an unprecedented move, the PBOC allowed banks to pay depositors a higher rate than the official benchmark rate. Given that banks have been fighting to attract deposits, the move is likely going to result in a higher not lower deposit rate. Keeping the deposit rate at a higher level would help banks to retain deposits. This is also a milestone for interest rate liberalization.”
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at firstname.lastname@example.org