Policy Rates (Aug.)

The PBOC has lowered its policy rates for the second time in three months, amid growing concerns among policymakers about the health of China’s economy. A larger-than-usual MLF cut had hinted at a step-up in the scale of easing, but the change was not fully carried over to the Loan Prime Rate (LPR) that underpins loan pricing. The big picture is that the PBOC’s approach to monetary policy is of limited use in the current environment and won’t be enough, on its own at least, to put a floor beneath growth.