Why fight four Feds?
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.”
Source: Bloomberg
Ploy
As of last night’s news in Bberg, the PBoC is said to be whispering in to lenders’ ears to hold off raising deposit rates.
PBOC Said to Tell China Banks to Hold Off Raising Deposit Rates
2015-05-14 10:18:43.397 GMT
By Bloomberg News
(Bloomberg) — China’s central bank told lenders to hold
off from using the extra room to raise deposit rates that
officially became available from May 11, according to people
familiar with the matter.
The people asked not to be identified because the guidance
wasn’t made public. The People’s Bank of China didn’t
immediately respond to a faxed request for comment.
The twist of loosening restrictions via a higher interest
rate ceiling — it was boosted to 1.5 times benchmark levels
from 1.3 times — and then tightening via instructions to
lenders shows China’s struggle to push through reforms in a
faltering economy. Revamping deposit rates is the “riskiest”
part of rate liberalization, the central bank said previously.
Pon
And what’s the impact on the charts?!