China’s Central Bank Cuts Interest Rates: A Sign Of Slowing Economic Growth?

China’s central bank cut interest rates for the second time in less than four months, in a fresh sign that the country’s leadership is becoming more aggressive in trying to stop the slowdown of economic growth, The Wall Street Journal reports.

The rate cut by the People’s Bank of China was announced Saturday, and it came sooner than some analysts and investors had expected.  It reflects growing worries over the world’s second-largest economy as it struggles with certain difficulties: a slumping property market, more money being sent offshore and growing risks of falling prices that, in effect, are pushing up borrowing costs for businesses.

The cut, effective Sunday, lowers by a quarter percentage point the benchmark one-year loan rate, to 5.35%, and the one-year deposit rate, to 2.5%. In a statement accompanying the announcement, the central bank singled out increasing deflationary pressure as a trigger for the move, saying that plunging commodity prices world-wide “provided room” to spur growth by lowering interest rates.

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