FX.co ★ China’s central bank takes steps to support virus-hit economy

The People’s Bank of China has been recently operating under pressure as it needs to support the country's economy amid the raging coronavirus infection. The regulator is expected to respond promptly and effectively to the current economic situation. China’s central bank has already taken some steps to stimulate the economy. Thus, recently the PBOC has cut its benchmark lending rate. It is not clear yet whether this stimulus measure will be enough to heal the weakening economy. Market participants were not surprised by this decision as the interest rate cut for prime borrowers was long anticipated. However, investors widely expect further supporting measures from both the central bank and the Chinese government. China’s economy is still at risk of a recession as it has already been heavily affected by the COVID-19 virus. Against this background, it is crucial for China to avoid the looming economic collapse. To keep the economy afloat, the officials will need to increase budget spending and take measures to stimulate domestic consumption.