China Cuts Key Interest Rates Amid Economic Challenges

China's central bank, the People's Bank of China (PBOC), has implemented surprise rate cuts to stimulate economic growth amid ongoing challenges such as a troubled property sector, weak consumer demand, and deflationary pressures. The seven-day reverse repo rate was reduced from 1.8% to 1.7%, the one-year loan prime rate (LPR) from 3.45% to 3.35%, and the five-year LPR from 3.95% to 3.85%. This is the first broad rate cut since August 2023 and follows weaker-than-expected second-quarter GDP growth. Market reactions were mixed, with muted responses in Chinese stock markets but some positive movement in Hong Kong’s Hang Seng index. Analysts suggest the cuts aim to achieve growth targets and address economic headwinds, with some noting the move was facilitated by expectations of future Federal Reserve rate cuts. The effectiveness of these measures in ensuring sustained economic recovery remains uncertain.