China cuts interest rates; Fed is up next
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China today joined the list of countries cutting interest rates to try to boost economic growth.
The decision came ahead of the Federal Reserve’s meeting today. The Fed is expected to slash its benchmark rate to 1% from 1.5%. An announcement is expected at about 11:15 a.m. PDT.
The Bank of Japan may cut its rate, now 0.50%, on Friday.
As for China, Bloomberg News reports:
China cut interest rates for the third time in two months to stimulate growth in the world’s fourth-largest economy after the global financial crisis curbed exports and production. The key one-year lending rate will drop to 6.66% from 6.93%, the People’s Bank of China said on its website today. The deposit rate will fall to 3.60% from 3.87%. China’s expansion dwindled to 9% in the third quarter from 11.9% in 2007 and industrial production grew at the slowest pace in six years in September as export markets dried up. ‘This cut was driven by the slowdown in the third quarter and the likelihood that the U.S. and other central banks will cut rates,’ said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. ‘It isn’t likely to have an immediate impact on China’s economy; what’s needed is more government spending.’ Export orders dropped in the third quarter to the lowest level since 2005. Home sales plunged 55.5% in Beijing and 38.5% in Shanghai in the first eight months from a year earlier, according to the official Xinhua News Agency. Sustaining growth is the government’s ‘first priority,’ Premier Wen Jiabao said Oct. 25.