China's central bank just dropped another monetary 'surprise' with a 25bp cut to both 1-year and 5-year loan prime rates. The move pushes rates to historic lows of 3.1% and 3.6%. PBoC Governor Pan telegraphed this on Friday, but the size of the cut still surprised markets.
Big question: Will banks actually lend more when the economy's struggling? Lower rates don't automatically mean more credit flowing. We are witnessing how stupid Keynesianism keeps ramming its head against the same wall, slowly destroying the very fabric of the economy.
Key points:
- Largest rate cut in recent memory
- Part of Beijing's aggressive economic stimulus
- Banks already cut deposit rates last week
- Standard Chartered sees this as policy pivot