China’s Surprise Rate Cut Is the Bare Minimum
The central bank’s response to a sluggish economy looks almost grudging. Further assistance awaits Fed action.
Proceeding slowly, if not surely.
Photographer: Andrea Verdelli/BloombergIn finally trimming a key interest rate, China did the bare minimum to display attentiveness to sluggish growth and anemic levels of inflation. This is far from a major shot in the arm for the economy. That may await cuts by the Federal Reserve, an uncomfortable degree of dependence on
the nation’s biggest rival.
The action by the People's Bank of China is the surprise that almost doesn’t fit the description. True, few economists predicted the step on Monday. But the case for markedly easing borrowing costs, not merely nudging them a tad lower, has been compelling for a while. The reduction of 10 basis points in the seven-day repurchase rate, followed quickly by similar steps from commercial lenders, looks grudging. The best that can be said is that, coming after a major Communist Party gathering, the move suggests at least some desire to shore up growth.