PBOC cuts repo rate to boost economy

China's central bank yesterday cut its 14-day repurchase rate to 3.4 percent as it made its third move in four months to trim interest rates and boost the economy.

The People's Bank of China cut the rate by 0.1 percentage point as it sold 20 billion yuan (US$3.26 billion) of 14-day bonds to banks yesterday. Cutting the rate will reduce banks' incentive to purchase bonds from the PBOC, leaving more liquidity in the banking system. The central bank's move is set to lower overall funding costs and encourage companies to issue bonds.

The PBOC has made two cuts in September and July to ease liquidity.

Economists saw the reduc-tion as part of recent easing measures to stabilize the economy.

"We view this as another easing sign after the PBOC injected 500 billion yuan of liquidity through its standing lending facility and loosened credit policy significantly for the property sector," Nomura Securities Co said in a note yesterday.

The brokerage said the government may cut 50 basis points from the bank reserve requirement ratio each quarter from now to the fourth quarter of 2015.

Last month, the PBOC provided 100 billion yuan to each of the nation's five biggest lenders after it trimmed the reserve requirement in the second quarter for banks that deal with small businesses and agricultural companies.