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Chinese rate cuts ‘overdue’: AMP Capital

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By Scott Hodder
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2 minute read

The decision of the People’s Bank of China to cut interest rates is not only a good move for China but also well “overdue”, says AMP Capital chief economist Shane Oliver.

Mr Oliver said “relatively high” interest rates along with the country’s monetary policy being “too tight” has been holding back Chinese growth this year.

“After resisting traditional monetary stimulus measures in favour of various ‘mini stimulus’ initiatives the People’s Bank of China (PBOC) has finally cut interest rates,” Mr Oliver said.

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“Our assessment is that this is a good [and] overdue move as relatively high interest rates have been holding back Chinese growth this year,” he said.

Mr Oliver also pointed out that China’s decision to cut interest rates adds to the “determination of global policymakers” to avoid deflation and support economic growth.

“While US quantitative easing (QE) may have ended, it’s being replaced by QE in Japan and Europe and rate cuts in China,” Mr Oliver said. “And rate hikes are a fair way off in the US and a long way off in Australia. This in turn augurs well for shares and other growth assets.”

“The Chinese rate cut and the signal of determination to support growth it provides is also positive for commodity prices and the Australian share market,” he said.

“While a return to a secular bull market in commodities and relative outperformance by Australian shares is unlikely, both have been oversold lately and China’s move could provide the trigger for a decent rally into year end,” Mr Oliver said.

Chinese rate cuts ‘overdue’: AMP Capital

The decision of the People’s Bank of China to cut interest rates is not only a good move for China but also well “overdue”, says AMP Capital chief economist Shane Oliver.

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