China’s central bank cuts interest rate to defend economy amid Trump’s tariffs

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On Wednesday, China’s central bank announced a series of monetary easing measures, including interest rate cuts and a significant liquidity injection, in an effort to cushion the impact of the ongoing trade tensions with the United States.

The moves are part of a broader stimulus strategy by Chinese authorities as they seek to mitigate the economic fallout from the tariff standoff initiated by the administration of former U.S. President Donald Trump.

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The announcement follows news that U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are scheduled to meet with China’s top economic policymaker, He Lifeng, in Switzerland this weekend, an anticipated step toward easing trade tensions.

Chinese markets responded positively to the news, with stocks rising on optimism over the monetary stimulus and upcoming trade discussions.

According to details released by the People’s Bank of China (PBOC), the borrowing rate on seven-day reverse repurchase agreements, a key policy rate, will be cut by 10 basis points to 1.40%, effective May 8. Other benchmark rates are expected to follow suit.

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In addition, the PBOC will reduce the reserve requirement ratio (RRR) for banks by 50 basis points starting May 15, lowering the average RRR to 6.2%. PBOC Governor Pan Gongsheng stated that this marks the first RRR cut since September of last year and will inject approximately 1 trillion yuan (about $138 billion) into the financial system.

Meanwhile, the U.S. Federal Reserve, led by Chair Jerome Powell, is set to convene on Wednesday to deliberate on potential interest rate changes amid ongoing pressure from President Trump to implement a rate cut.

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