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China’s faltering economy requires a lifeline from the central bank, regardless of admonitions that inflation is creeping higher and needs to be contained. With growth struggling and demand for credit cratering, the People’s Bank of China has made clear that it’s the recovery first. Price increases might be worrying, but are a second order problem — for now. Beijing must consider the outlook dire.
The PBOC lowered a key interest rate Monday, a surprise for economists and the first trim since January. The reduction in the rate on one-year policy loans was modest by the standards of global adjustments in borrowing costs — 10 basis points — but it was jarring because the central bank had sounded distinctly less dovish of late. Just days earlier, officials appeared to steer investors away from the notion that rate cuts could ride to the rescue. The emerging danger was inflation;…
