China's central bank is expected to cut key rates soon, following a directive from a meeting this week led by the country's second-in-command.
However, these moves have not turned investor confidence around. The Dow Jones industrial average"The Fed rate cut gives the PBOC more leeway to cut rates in China without prompting excessive capital outflows, therefore making a Chinese rate cut more likely," Council on Foreign Relations economist Benn Steil said in an email last week.
Policymakers from the People's Bank of China have indicated rates will move lower, as investors have expected for some time. But so far, the PBOC has been relatively more conservative, compared with other central banks. Several analysts expect the State Council meeting will tip the PBOC's hand. "Lower rates may not help the economy much, but could fuel a small-cap stock bubble which will collapse later," Larry Hu, chief China economist at Macquarie, said in a report released Wednesday. "If it doesn't cut, it will take the blame for not doing enough."
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