The People's Bank of China decided to cut financial institutions RMB benchmark deposit and lending interest rates since July 6, 2012. Financial institutions one - year deposit the benchmark interest rate to be adjusted downward in the the the by .25 percentage points, a year period loan the benchmark interest rate to be adjusted downward in by 0.31 percentage points.
 
The lower limit of the floating range of lending rates of financial institutions was adjusted to 0.7 times the benchmark interest rate since the same day. Point in time the rate cut earlier than expected, with the previous time interval less than a month, indicating that the central bank's policy efforts to once again increase. The interest rate cut to bring the gospel of the prolonged recession in the steel market?
 
First, what factors to stimulate the rate cut?
 
All along, the main objective of monetary policy in China is the economy and inflation, the rate cut on the one hand reflects our level of inflation down quickly, China's consumer price level rose by 3.0% in May 2012, has been the highest since June 2010 low. With the summer, the summer grain harvest, fruits and vegetables, a large number of listed, the post-price will be stable to provide protection. Can determine the level of inflation than the current economy facing problems, we can say that inflation provides space for the reduction in interest rates.
 
On the other hand, the interest rate cut indicates that the upcoming economic data in July is not optimistic about the economic downturn, the momentum has clearly shifted. 1-5 months of 2012, investment in fixed assets (excluding farmers) 10.8924 trillion yuan, year-on-year nominal growth of 20.1 percent, approaching the 20% barrier has fallen to its lowest level since 2003, even before and after the 2008 financial crisis growth did not come close to 20%. From the industrial added value growth year-on-year growth rate of above-scale industrial added value in May 2012 was only 9.6%, less than 10% for two consecutive months, the growth rate of minimum two months in the second half of 2009. Expected macroeconomic data in June may be even worse, the possibility of very large second-quarter GDP growth rate fell below 8%. In other words, the slowdown in economic growth forced the government to cut interest rates, is also consistent with the country "steady growth" policy-oriented.
 
Rate cut really fat Steel City?
 
Interest rate cuts to help reduce corporate financing costs, and improve corporate profits will boost market confidence, to a certain extent. Continued downturn in the steel industry since the second half of 2011, involving steel corporate profits have been shrinking dramatically. According to data released by the China Steel Association, 1 May 2012, the large and medium-sized steel enterprises realized profits of only 2.533 billion yuan, down 94.26 percent, the amount of loss of 11.749 billion yuan, the loss of 32.5%. The rate cut will ease cost pressures in the steel industry to a certain extent.
 
But in the long run, the rate cut is unlikely to change the steel market price trends. Supply and demand factors are the core factors determining the steel price trend. According to the China Steel Association statistics show that average daily production in mid-June crude steel reached 1.9705 million tons, 28,900 tons less than the early, although a slight decline, but the rate of decline is relatively slow, and some repeated.
 
Overall, crude steel still remain high, the production pressures still exist. For 7-8 months for the industry off-season, high temperatures and rainy weather continued downturn in market demand, the social stock of steel has been turned up by the fall at the end of June.
 
High and production inventory, weak demand fundamentals of the downward trend will lead to a continuation of interest rate cuts and can not really fat Steel City. Expected that the steel market prices will continue to the weak shocks in July.



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