Black Monday 2015: China's central bank cuts benchmark interest rates, European markets rally

Lynsey Barber
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Interest rate cuts in China have pleased markets (Source: Getty)

China's central bank has cut one of its key interest rates following a tumultuous day for global markets.

The People's Bank of China (PBoC) has cut the one-year benchmark lending rate by 25 basis points to 4.6 per cent - the fifth cut to interest rates in less than 12 months - as the country seeks to stabilise the economy.

The reserve requirement ratio - the amount of cash the banks must hold in reserves - has also been dropped by 50 basis points. This will take effect from 6 September, to spur further lending and spending. The benchmark one-year savings rate has also been cut by quarter of a percentage point to 1.75 per cent.

China's central bank said it will continue to closely monitor changes in liquidity and use various tools to regulate flows and maintain liquidity in the market.

Read more: How yesterday compares with history's worst market crashes

Commenting on the move, the PBoC said in a statement:

At present, China's economic growth downward pressure still exists, steady growth, adjusting structure, promoting reform, benefit people's livelihood and risk prevention task is still very arduous, the global financial market has recently appeared greater volatility, the need for more flexible use of monetary policy tools to create a favorable environment for monetary and financial adjustment of economic structure and economic stable and healthy development.

The move sent European stocks up, with the FTSE 100 extending earlier gains made on Tuesday rising more than 3.5 per cent in early afternoon trading.

The Dax was up more than 400 points and more than 4.5 per cent, and the Cac by a little over 200 points, or 4.5 per cent.

The blue-chip indices were rebounding after Black Monday wiped trillions from the value of markets across the globe.

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