China cut for the third time in four months the key lending rate on Saturday by one-quarter of a percentage point, the same rate cut on deposit rate.

The People's Bank of China said the move aims to make available lower borrowing costs for Chinese firms. The Chinese central bank said the lower deposit interest rate would help the lenders maintain its profit margins even if the lending rates likewise dipped.

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The Wall Street Journal reports that while economists were expecting another rate cut, the Saturday reduction was sooner-than-anticipated. It also came just a few days ahead of two major summits in Beijing where the national government would make known its growth target for 2015.

In 2014, China logged a 7.4 percent economic expansion, lower than government targets and the slowed pace in almost 25 years. If the summit will result in a lower target or none at all, it indicates China has developed tolerance for slower growth or there is less pressure to cut.

The central bank also hiked the maximum interest rate on bank deposits to 1.3 times the key lending rate, up from 1.2 percent.

UBS Group chief China economist Wang Tao said the rate cut was urgently needed because of China's heavy debt burden and the central bank's obligation to keep its financial markets stable.

Mizuho Securities Asia chief Asia economist Shen Jianguang said the PBOC acted very well.

"After two rate cuts, the financing costs will be cut down pretty effectively, but more rate reductions are needed," quotes Bloomberg.

He forecasts the next reserve-ratio reduction would be in late March and a fourth rate cut in April.

The central bank, in a statement, said the interest rate cut targets to create a neutral and proper monetary environment, but insists it does not represent a change in PBOC's prudent monetary policy stand.

Tagsinterest rates, people's bank of china