China to cut interest rates by 0.25%: central bank

China's central bank on Saturday announced that it will cut the benchmark deposit and loan interest rates by 25 basis points, as authorities seek to prop up flagging growth in the world's second-largest economy. The move, which goes into effect Sunday and marks the second cut in four months, was largely expected amid a raft of weakening economic indicators, analysts said.
It comes days ahead of the opening of the annual meeting of China's rubber-stamp legislature, the National People's Congress, at which Premier Li Keqiang is expected to deliver an address on the state of the country's economy. Last month, Beijing announced that China's gross domestic product rose an annual 7.4 percent in 2014 - a 24-year low. In a statement posted on its website, the People's Bank of China (PBoC) said it would slash its one-year rate for deposits to 2.5 percent and its one-year lending rate to 5.35 percent.
The bank pointed to "historically low inflation" as among the factors behind the move. China's inflation plunged to a more than five-year low of 0.8 percent in January, fuelling fears that the Asian giant is on the brink of a deflationary spiral. "The focus of the interest rate adjustment is to maintain real rate levels that are appropriate given the trends in economic growth, prices and employment," the bank said in its statement.
"It does not represent a change in the orientation of our monetary policy," it added. China's leaders are trying to pull off a managed slowdown of the Asian giant to make growth more sustainable and led by consumer spending as in other major economies. The slowdown last year prompted some intervention by authorities to establish a floor on growth even as they tout a retooling of the country's economic model that is expected to result in further slowdowns in the years ahead. Li has said publicly that weaker GDP growth is no problem so long as its quality remains high and job creation remains resilient.
Stalling factory growth, soft exports and a weakening property market are among the factors adding to the pressure on authorities. The last round of interest cuts came in November, when the bank slashed deposit rates by 25 basis points and the one-year lending rate by 40 basis points.