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PBoC fires its first salvo in FX wars – Rabobank

FXStreet (Barcelona) - The Rabobank Research Team note PBoC entering the FX war fiasco by surprising the markets with a rate cut.

Key Quotes

“Only few weeks after the BoJ shocked the markets with a huge dose of fresh monetary policy stimulus, the People’s Bank of China unexpectedly cut its base 1-year lending rate by 40bps to 5.6% with the 1-year deposit rate trimmed by 25bps to 2.75%. “

“The PBoC also increased flexibility in the banking sector allowing banks to offer deposit rates at up to 20% above the benchmark from the previous cap of 10%. “

“While the central bank insisted that its first interest rate cut since 2012 (following somewhat insufficient targeted easing measures) is “a neutral operation and doesn’t mean any change in monetary policy direction”, it seems that China fired its first salvo in the currency war with the BoJ.”

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