Chinese Central Bank cuts interest rates

//Chinese Central Bank cuts interest rates

Chinese Central Bank cuts interest rates

Bloomberg: PBOC Cuts Interest Rate for One Year Loans to Support Banks

Article published: Feb 17, 2020

IB Economics syllabus: Macroeconomics (expansionary monetary policy)

Due to the negative effects of the coronavirus on the Chinese economy, the Central Bank of China has decided to cut its interest rates. More specifically, they have cut the interest rates to “commercial lenders” that is to say, banks in the form of “medium-term funding. Therefore, commercial banks of China can have access to an additional $29 billion which they can lend (inject investments into the circular flow of income). This is a clear expansionary monetary policy that shouls shidt the AD (aggregate demand) curve to the right. Make sure not to forget to explain the pros and cons of such policy decitions.

Source of image: Giulia Marchi/Bloomberg

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By | 2020-02-17T15:58:34+00:00 February 17th, 2020|Macro|Comments Off on Chinese Central Bank cuts interest rates

About the Author:

My name is Daniel Szekely and I work as an IB Economics tutor, examiner and teacher. Having earned an MA degree in Economics at the University of Aberdeen, I started my career as a financial analyst at Morgan Stanley, one of the largest investment banks of the world. Yet, despite the promising career prospects of the banking industry, I decided to make a larger social impact by becoming a teacher. Currently, I teach IB Economics at SEK Budapest International School and have been an examiner for over 8 years. I started EconDaddy as a simple blog to share great articles with my students and others taking IB Economics around the world to use for their commentaries. Being a practicing IB Economics tutor, I have first hand insight into the most common mistakes of students, so the EconDaddy blog now also provides exam and commentary writing tips.

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