The Day at a Glance | December 20 2021

The Top

*The People`s Bank of China cut the interest rate for the first time in 20 months in order to counter a slowdown.

*Mexico`s economy increased 1.2% annual in November, according to the INEGI`s leading indicator.

*Approval of the electric car subsidy in the U.S. was stopped after failed negotiations regarding Biden`s social spending package.

*The World Economic Forum meeting in Davos, Switzerland, was postponed for a second consecutive year after the implementation of restrictions in the country because of the virus.

*The Netherlands declares national quarantine after an increase in cases.

Economic environment

Interest rate cut in China. The People`s Bank of China decided to decrease the interest rate this morning – for the first time since April 2020 – in order to back growth. The yearly rate for preferential loans was reduced from 3.85% to 3.8%, while the same rate for 5 years remained at 4.65%. The decrease in the preferential loans rate will allow cheaper credit among Chinese businesses with solid credit profiles and an estimated reduction of 80 billion yuan in interest payment costs in 2022. This is the second stimulus measure adopted by the bank after a cut in the capital requirements was approved in the banking sector in the last few days. This monetary stimuli seeks to counter a strong economic slowdown after the real-estate crisis, weak domestic demand, and sporadic outbreaks of the virus in the country. The cut reinforces expectations of greater monetary stimuli in China, contrary to what is occurring among advanced economies. Additionally, the bank has announced that it will purchase “quality” assets from real-estate companies in order to avoid a deeper crisis in the sector.