China Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21

Tyler Durden's picture

And then there were 21.

Hours ago on Saturday, the country whose currency is largely pegged to the dollar which itself is now anticipating a rate hike in the coming months, surprised the world by confirming its economic slowdown yet again following a recent rate cut just this past November when it lowered its benchmark rate by 40 bps, after it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

From the PBOC announcement:

People's Bank of China decided to cut financial institutions RMB benchmark lending and deposit interest rates since March 1, 2015. The one-year benchmark lending rate by 0.25 percentage point to 5.35%; year benchmark deposit rate by 0.25 percentage points to 2.5%, while the combination of market-oriented reforms to promote the interest rate, the upper limit of the floating range of interest rates on deposits of financial institutions by the deposit base 1.2 times to 1.3 times the interest rate adjustment; adjusted lending rates and individual housing provident fund deposit and other deposit and lending rates.

As the WSJ notes, "the latest move took place just as China’s legislature, the National People’s Congress, prepared to gather Thursday for its annual meeting. The gathering is usually when China unveils its economic growth target for the year. Last year’s growth of 7.4% came in just below the 2014 target of about 7.5%. It was the lowest growth rate in nearly a quarter century."

However, just so the rate cut is not seen as being, well, a rate cut and an easing shift to China's monetary policy especially considering that the November rate cut did absolutely nothing to boost China's all important housing market, the PBOC was quick to note that the second rate cut in 4 months is "to keep real interest rates at level to adapt to economic growth, prices, employment trends, and does not represent a sound monetary policy changes. China's economic development has entered a new normal, and development conditions and development environments are changing, and its core is to change the way of economic development and economic structure."

In other words, when is a rate cut not a rate cut? When it's in China. The PBOC also provided the following stock announcement explaining what happens next:

Next, we will continue to follow the CPC Central Committee and the State Council, the strategic plan, adhere to the general tone of the work while maintaining stability and macroeconomic policy should be steady, micro policies to live the general idea, more actively adapt to the economic development of the new normal, the transfer and adjustment structure in a more important position, maintain the continuity and stability of policy and continue to implement a prudent monetary policy, pay more attention to an appropriate degree, comprehensive use of various monetary policy tools, timely and appropriate fine-tuning for the adjustment of economic structure and the transformation and upgrading Moderate to create a neutral monetary and financial environment, and promote economic science and sustainable development. At the same time, more focus on innovation, blending in regulatory reform among the tight monetary policy combined with the deepening of reform, timely for businesses and individuals through the introduction of certificates of deposit, etc., continue to expand the financial institution independent pricing space, orderly interest rate reform and further improve the rate-control system, improve the interest rate transmission mechanism and constantly enhance the ability of the central bank interest rate regulation and macro-control effectiveness.

Said otherwise, a whole lot of reform promises. Kinda like Greece. Of course, what is not said is that as long as the Fed keeps threatening to and eventually actually hiking rates, not to mention the global economic contraction persists, China will have no choice but to engage in non-monetary, non-policy rate cuts for the indefinite future.

Here is Goldman's recap of what China did:

The People's Bank of China (PBOC) announced that benchmark lending and deposit rates will both be cut by 25 bps, effective from March 1. In addition, the deposit rate ceiling will be raised from 1.2 times to 1.3 times the benchmark interest rates, which effectively lowers the maximum deposit rate by 5 bp from 3.3% pa to 3.25% pa.


Economic growth is widely viewed as weak in early 2015, despite modestly better HSBC flash PMI data for February. The official PMI data to be released tomorrow (which should be known to senior government officials at this point and may well have remained below 50) might have been one factor behind the decision to cut now. The central bank also has a tendency not to take major policy actions during the CPPCC and NPC, which will start on March 3 and close on March 15. Waiting until after those events would have then implied more than two full weeks of delay.


The decision to cut benchmark interest rates again has been widely expected by the market (including us). There was also some speculation that the deposit rate ceiling would be increased. While the raise in the ceiling did come about, we believe a larger cut to the benchmark deposit rate arguably would have been more desirable as it could help lower funding costs more broadly in the economy. The increase in deposit rate ceiling is also a small further step towards interest rate liberalization. The cut to the benchmark lending rate is also smaller than the last cut in November (40 bps). This may make some observers view the move as cautious.


We expect further policy loosening in the coming months. The next move is likely to be a RRR cut, likely in 2Q, but a cut towards the end of 1Q cannot be ruled out (RRR cut is also a tool of liquidity management). Further benchmark interest rate cuts are also possible. The government is also loosening other policies such as allowing the exchange rate to depreciate modestly against the USD and stepping up infrastructure investments. These measures will likely provide some support for short-term growth, though the cautious nature of the measures so far may raise some questions in terms of whether the economy will experience a rebound as significant as the one seen in Q2 2014.

In conclusion, expect markets to soar even more on Monday while China continues to stealthily devalue the Renminbi in order to fight a housing market collapse that is now worse than what the US experienced after Lehman failed.

* * *

And for all those asking, here is the revised list of now 21 countries who have cut interest rates in just the first 2 months of 2015:

For those asking, here is the full, updated list of 20 central banks easing so far in 2015 courtesy of Reuters:


Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.

2. Jan. 7/Feb. 4 ROMANIA

Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.


The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 INDIA

The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

5. Jan. 15 EGYPT

Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

6. Jan. 16 PERU

Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

7. Jan. 20 TURKEY

Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

8. Jan. 21 CANADA

The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.


The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.

10. Jan. 24 PAKISTAN

Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

11. Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.

12. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

13. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

14. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

15. Feb. 4 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation.

16. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

17. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds

18. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years

19. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

20. February 23, ISRAEL

The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

21. February 28, CHINA

The People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

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vote_libertarian_party's picture

If a bank in China goes BOOM would we be allowed to know it?

toys for tits's picture

Keep dropping those rates China and drive your population into the arms of gold ... or vice versa.

new game's picture

goal is zero, as in we failed you, the people, but we scammed the system for our billions.

thanks for being idiots and working so hard. sorry to say we can give zero on your savings, but growth economics just didn't pan out for the moarjority...

when we run out of tools ,you are fucked and we are sitting pretty. go to a major university and get with keynsian command economy where as everything is stimulated and we pillfer the moarjority(commanly called skimming) and the trickle only gets to a select few that are hard working small tyme enterprenuers...

good luck plebs...

oudinot's picture

In 2008 all the mjaor US banks went BOOM in 2008 but they are still 'alive' today.....

Usurious's picture
Usurious (not verified) oudinot Feb 28, 2015 10:52 AM



big difference in being on 'life support' and being 'alive'....

taxpayer bailouts & 'mark to fantasy' baby

one_hundred's picture

my co-worker's mom makes $87 an hour on the laptop . She has been without work for 8 months but last month her pay check was $15653 just working on the laptop for a few hours. try this website...

AssFire's picture

Seems no nation can wait to collect death taxes- all must erode whatever anyone has saved in this currency war. No retirement, back to work slaves!

Colonel Walter E Kurtz's picture

Nice idea assfire.

All you need to do is eliminate a couple major U.S. cities and think about all the death/estate taxes that the gubmint can collect. Easy way to pay down some debt plus no future SS and medicaid obligations. Win-win for all (as long as it is not my city)!

booboo's picture

Year of the trapped central banks rat and one trick ponies.


Monetas's picture
Monetas (not verified) booboo Feb 28, 2015 9:19 AM


Bearwagon's picture

Quite the opposite, man, we've seen this all day and all of the night, until we just didn't notice anymore ...

AssFire's picture

Where is the video of guy screaming about the financial collapse while destroying shit with a baseball bat? I was hoping for that.

Monetas's picture
Monetas (not verified) Feb 28, 2015 9:05 AM

"I went to an ISIS public execution .... and a round of interest rate cuts broke out !" .... Monedas 1929 Comedy Jihad World Tour 

Cautiously Pessimistic's picture

Paging Grandma Yellen.  Please come to the red courtesy phone in the lobby.

Monetas's picture
Monetas (not verified) Feb 28, 2015 9:15 AM

Tyler, If someone was to give himself an up arrow selfie .... would the other posters know ?

miker's picture

I still think my concept of "Snap Depression" may unfold.  Essentially, it occurs when enough people finally get the big picture.  Consumption drops signficantly and quickly (within months).

The world economy is filled with non-essential products and services.  It wouldn't take much for this to snowball.

Bearwagon's picture

Sounds like a good idea.

Oldwood's picture

My concern is that we will not know what is essential until its too late.

Bearwagon's picture

Personally, I think it already is too late and we still don't know what's essential.

Monetas's picture
Monetas (not verified) miker Feb 28, 2015 9:25 AM

"Snap Beans" Depression .... one minute the consumers are buying steak .... the next minute .... they're buying cases of beans and toilet paper ?

Monetas's picture
Monetas (not verified) Monetas Feb 28, 2015 9:29 AM

Cans of extra spicy Nalley's chili con carne .... $1 .... the new coin of the realm .... use your fiat to wipe ?

Oldwood's picture

Are you saying my big screen TV and latest I-gadget are not essential? They need to take you away.....that's just hateful and hurtful.

mijev's picture

The world economy is filled with non-essential products and services.  It wouldn't take much for this to snowball.


The world is filled with non-essential humans. WTF purpose do 90% of the world's population serve? Not being a total asshole. Just asking.

Ginsengbull's picture

We need consumers. We need people to clean the toilets. We need a vibrant economy. We need diversity.

Oldwood's picture

So the challenge is to calculate how much I can qualify to borrow at negative interest rates that will generate enough income to support a meager retirement. Its the same math we have always used to predict our retirement, but instead of living off of savings interest, it now about using our worthless savings as collateral on massive loans paying negative interest. The beauty of it is that you will die before the note ever (if ever) matures. So not only do you have the coupon, you can actually spend the principle.

Winston Churchill's picture

Just call it a reverse annuity.

Cautiously Pessimistic's picture

Hey OW... there is always the Reverse Mortgage route too!  I believe 'The Fonz' (a.k.a. Henry Winkler) when he says it is a great deal.  Yeah, so there's that....

Bearwagon's picture

This is just essential in order to create money. If anyone wants to create money, nowadays he has to lend that amount of money to someone. That is the way it is created. Not with a printing press - that's cash, and uninteresting. "Real" money is "loaned" into existence, so someone has to borrow it. Otherwise there'd be no money - no matter what politicians or banksters tell about it. ;)

NoPension's picture

You need to learn the difference between money, currency and cash.
Some training over at Mike Maloney would help.

roddy6667's picture

If I borrow 4 million dollars and they pay me to take out the loan, I can live off that. Better yet, keep the 4 million, move somewhere else, and live much better.

mademesmile's picture

Did America start the interest rate cuts a few years ago?

Yen Cross's picture

I had a hunch the PBoC was going to go" Full retard" usd/cny is at 2012 levels.


1 US Dollar equals 6.27 Chinese Yuan
Questan1913's picture

And what does this mean?  It simply means central banks are ratcheting up the impoverishment of the so called "masses" (you), and transferring that stolen wealth to the scum "elites". (themselves).

GMadScientist's picture

Well that'll fix their credit bubble right up.

"Only the wisest and stupidest of men never change." - Confucius

Yen Cross's picture

If it isn't broken , don't fix it.


Soul Glow's picture

They're not slowing down, they're just cutting interest rates.

wmbz's picture

No one can really be suprised, it's what fiat producers do. Make it "free" and easy, backed by nothing, and in due course they always fail. It takes time but for banksters and gubmints it works very well. The worlds population is basically ingnorant as to the  issuance of currency, in fact are clueless as to how it comes about.

Ask just about anyone you know a simple question...Where does "money" come from, then sit back and listen.

wmbz's picture

I forgot...P.S. I have aked many so called smart people with college degrees the question of where/how does money enter the system? The majority have no idea, except that it comes from the government!

That's about all you need to know.

Yen Cross's picture

 The global( growth) farce is getting MOAR

ri·dic·u·lous r??diky?l?s/  by the second.    People can't afford to buy things and they're getting older. The banksters are so fucking mentally polluted, they can't see the non~existent STRANGE  I'm going to the beach before it rains bitchez  Get some exercise.
Northern Lights's picture

Hey, anyone guess what will be golds reaction to this on Monday morning??

JenkinsLane's picture

Should be good for $10 in overnight trade on Sunday.

Youri Carma's picture

Turkish central bank cuts interest rates
24 February 2015, by Yeliz Candemir (MarketWatch)

devo's picture

That's a lot of free Chinese currency that will flow into US stocks. Big Monday upcoming.

disabledvet's picture

"Free stuff Army" say hello to prices so low you are now insolvent.

Salah's picture

China's natal chart (Mao's founding) has transiting Pluto now in their 2nd House; should be very interesting.