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Chinese central bank lowers 14-day reverse repo rate

The People's Bank of China cut a key interest rate Dec. 18 in a move that follows other easing measures in recent weeks.

The central bank lowered the interest rate on 14-day reverse repurchase agreements to 2.65% from 2.70%. It maintained the interest rate on seven-day reverse repos at 2.50%, following a 5-basis-point reduction in November.

The change to the 14-day reverse repo rate is the first since a hike in April 2018, according to Julian Evans-Pritchard, senior China economist at Capital Economics.

While the move is marginal, it signals that the central bank "remains in easing mode" and may urge banks to make another 5-basis-point cut to the loan prime rate Dec. 20, Evans-Pritchard said, adding that the pace of easing is likely to pick up next year with the anticipated cuts projected at 50 basis points in total.

In November the People's Bank of China cut the one-year loan prime rate by 5 basis points to 4.15% and the five-year rate by a similar amount to 4.80%.