China slashes key liquidity rate for first time since 2015

China's central bank unexpectedly trimmed akeyinterbank lendingrateon Monday, thefirsteasing in theliquiditytool in more than four years and a signal to markets that policymakers are ready to act to prop up slowing growth.

The People's Bank ofChina(PBOC) said on its website that it was lowering the seven-day reverse repurchaserateto 2.50 per cent from 2.55 per cent.

The move cheeredChina's bond market and comes just two weeks after the PBOC cut the borrowing cost on its medium-term lending facility (MLF) loans by the same margin.

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Analysts say the unexpected cut on Monday shows the central bank is keen to ease investor worries that higher inflation will prevent it from delivering fresh stimulus measures.

Zhou Hao, an economist at Commerzbank in Singapore said the reverse reporatecut indicates a policy change in coming months, including "some fine-tuning to prioritise the pro-growth policy for thetimebeing."

Driven by soaring pork prices from the spread of African Swine Fever,China's consumer inflation rose past the government's target of around 3 per cent inOctober to its fastest pace in almost eight years, posing a dilemma for the PBOC.

"I expected an easing move from the PBOC, just didn't know when," said a Hong Kong-based portfolio manager. "The (high) Consumer Price Index (CPI) was only pigging CPI. Everything else is in big trouble."

He noted that the central bank continues to take a cautious approach to ease. In a report released Saturday, the PBOC said it would maintain a prudent monetary policy to prevent inflation from spreading.

Markets participants widely believe the tworatecutsin the open market operations suggest a similar adjustment in its newly established Loan PrimeRate.

The PBOC will announce its monthly LPR fixing on Wednesday. Therateon the one-year fixing now stands at 4.2per cent whilethe five-year is at 4.85 per cent.

Theratecut bolstered the bond market on Monday morning, withChina's benchmark 10-year treasury futures for December delivery were up more than 0.4 per cent.

The PBOC has skipped reverse repo operations for 15 straight trading days before the resumption on Monday when it injected 180 billion yuan ($25.74 billion) into the interbank market.