Financial and Monetary Systems

China's central bank cuts rates, and other economics stories to read

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The headquarters of the People's Bank of China, the central bank, Beijing, China.

China's central bank has cut interest rates. Image: REUTERS/Jason Lee

Joe Myers
Writer, Forum Stories
  • This weekly round-up brings you the latest news from the world of economics and finance.
  • Top economy stories: China's central bank cuts rates; US GDP growth hits 2.8% in Q2; Latest forecasts for Indian GDP.

1. China's central bank cuts rates

In a move that surprised markets, China's central bank cut major short- and long-term interest rates. The reductions have been applied to the bank's short-term policy rate, its market operations rates and benchmark bank lending rates, according to Reuters.

It's the first such move since August last year and follows a closed-door meeting of the Communist Party's Central Committee, known as a plenum, which takes place every five years.

China's policy and loan prime rates
Change in Chinese rates. Image: Reuters

China's central bank surprised the markets again this week with an unscheduled lending operation at significantly lower rates.

The People's Bank of China said in a statement it had issued 200 billion yuan ($27.5 billion) in one-year loans under its medium-term lending facility (MLF) at 2.30%, down 20 basis points from its previous MLF loan, Bloomberg reports.

2. US GDP grows at 2.8% in second quarter

Gross domestic product (GDP) in the United States increased by 2.8% in the second quarter of this year. Gains in inventory building and increased government spending helped boost growth and gains in consumer spending amid receding inflation.

Despite a regression in the housing market causing a minor drag on the US economy, it continues to outperform its peers. The annualized 2.8% growth rate also surpassed expectations in a Reuters poll of economists.

Consumer spending accounts for more than two-thirds of the country's economy and grew at 2.3% in the quarter, up from 1.5% in the first quarter of the year.

US gross domestic product
The US economy continues to outperform its peers. Image: Reuters
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3. News in brief: Stories on the economy from around the world

The Bank of Canada has cut interest rates for a second month in a row - lowering it by a further 25 basis points to 4.5%.

Sri Lanka has also reduced interest rates by 25 basis points, reducing the Standing Deposit Facility Rate to 8.25% and the Standing Lending Facility Rate to 9.25%.

Growth in Eurozone business activity slowed in July, with expansion in the services sector failing to counteract a downturn among manufacturers.

It comes as surveys in Germany and France show businesses in Europe's two largest economies are becoming increasingly pessimistic about recovery.

Thailand's government expects the economy to expand more quickly than initially expected, largely as a result of near-record foreign tourist arrivals.

Estimates by South Korea's central bank suggest that North Korea's economy grew quickly last year - after three years of decline.

The Indian government is predicting growth of between 6.5% and 7% this fiscal year. Private economists and the country's central bank have issued more optimistic predictions.

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4. More on finance and the economy from our blog

Commission-based incentives for selling financial products carry the risk of conflicts of interest, writes Gregory Van, the CEO of Endowus. A shift to a 'fee-based' model could help.

Investors can play a significant role in encouraging national oil companies to reduce their methane emissions, explain Andrew Howell of the Environmental Defense Fund, and Pavel Laberko, of the Emerging Markets Investors Alliance. Those companies with significant market interactions already tend to adopt more methane reduction programmes, they say.

The 'Great Wealth Transfer' is underway. Lena Haas, Head of Wealth Management Advice and Solutions at Edward Jones, takes a look at what it might mean for women.

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Contents
1. China's central bank cuts rates2. US GDP grows at 2.8% in second quarter3. News in brief: Stories on the economy from around the world4. More on finance and the economy from our blog

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