China surprises markets with unexpected interest cuts

China's central bank, the People's Bank of China (PBC), unexpectedly decided to lower its interest rates by 10 basis points on Monday.

The one-year loan prime rate (LPR) dropped to 3.35%, and the over-five-year LPR decreased to 3.85%.

The bank had kept the one-year rate at 3.45% since August 2023 and the five-year rate at 3.95% since February 2024.

The market had forecasted that the bank would hold the rates constant.

In the country, consumer inflation has been increasing slightly, while producer inflation has posted declines.

China's gross domestic product (GDP) rose by 4.7% in the second quarter of 2024, below market expectations.

The PBC's rate reduction was seen as a move to revive the flagging economy.