China’s Central Bank Lowers Short-Term Policy Rate

China’s central bank cut a short-term policy rate on Friday, a day after saying it will lower the amount of deposits banks have to set aside as reserves to spur more lending as the world’s second-largest economy shows more signs of slowing.

The People’s Bank of China cut the interest rate on 14-day reverse repurchase operations to 1.95% from 2.15% while injecting 34 billion yuan ($4.67 billion) worth of liquidity via the policy mechanism. That is the first time since January that the central bank has taken this step.

In June, the PBOC lowered the interest rate on seven-day reverse repos to guide down the lending rates offered by the country’s commercial banks.

Friday’s easing move came the day after the PBOC said that it would cut the reserve requirement ratio for commercial banks by 0.25 percentage point.

The central bank kept the interest rate on seven-day reverse repos unchanged at 1.80% on Friday, while injecting CNY105 billion worth of liquidity via the policy tool. It also kept the interest rate of its one-year medium-term lending facility steady at 2.5% and injected CNY591 billion worth of liquidity through the MLF.

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