Worse! China's Central Bank Forced to Cut Interest Rates

<p>&nbsp;Spurred by fresh concerns, the People's Bank of China (PBOC) cut its key policy rate for the second time in three months on Tuesday.</p><p><br /></p><p>The medium term loan facility (MLF) rate was lowered to 2.5% from 2.65% previously and the reverse repo rate from 1.9% to 1.8%.</p><p><br /></p><p>The unexpected move is seen as a new effort by the authorities to support its economic recovery.</p><p><br /></p><p>Analysts even see that the move also opens the door for a reduction in China's lending benchmark, the lending prime rate (LPR) next week.</p><p><br /></p><p><br /></p><p>The MLF rate serves as a guide to the LPR and most markets use it as a precursor to any changes in lending benchmarks.</p><p><br /></p><p>In addition, banks in the country are also reportedly selling US dollars as an intervention to support the local currency, the yuan.</p><p><br /></p><p>The PBOC's action was then followed by dismal Chinese economic data, with industrial production edging lower in August.</p><p><br /></p><p>The unemployment rate also increased, prompting the authorities to no longer publish data for the youth unemployment rate.</p><p><br /></p><p>The yuan edged lower in the Asian session at 7.296 against the greenback, falling to a more than 9-month low.</p>