Forex Marketz Daily Forex News – Fully Markets Update
The Peoples’ Bank of China (PBOC) has stepped into the financial markets for their third interest rate cut over a six month period. Investors, and economists, have now have heightened concerns the economic slowdown is beginning to hurt Beijing.
After the announcement, Asian markets shot higher. At the time of this report, the Shanghai Composite is nearly two percent higher on the trading day.
Today’s move by the PBOC lends support that the tepid economic conditions in the world’s second largest economy will only be tolerated by Beijing up to a certain point. The PBOC is concerned about employment. As long as that remains stable, they are not going to interfere. Looks like that red line has been reached. Question is, has it been crossed?
Earlier this morning, the PBOC cut the benchmark rates (both lending and deposit) by 25 basis points to 5.1 and 2.25 percent, respectively. The bank is reacting to a series of soft economic data that is pointing to their economy missing their target seven percent growth rate. They have set their target “to around seven percent.” That level of gross domestic product (GDP) growth is now at risk.
The PBOC wants to maintain a stable employment rate and conditions across the mainland. This is their number one priority as they want to steer their economy away from an export economy to a more consumption based economy. While they have been successful to this point, there are now signs of strain in their labor force. Last month the Liaoning provincial government slashed job rate growth and their target from 700K to 400K. According to Reuters, they cited a less than stellar job growth trend. However the labor ministry, separately, said that economists should not be enthused as job creation is beginning to slowdown.
The red line for the PBOC has been breached.
