Stocks rallied in Asia after the People’s Bank of China cut its medium-term policy rate in the face of slowing economic growth and the US Federal Reserve held interest rates steady.

The Hang Seng China Enterprises index, which tracks mainland Chinese companies listed in Hong Kong, rose 1.4 per cent and the CSI 300 of Shanghai- and Shenzhen-listed stocks gained 0.5 per cent. Japan’s Topix climbed 0.4 per cent and Australia’s S&P/ASX 200 rose 0.3 per cent.

The gains came after the PBoC lowered its medium-term lending facility rate by 0.1 percentage point to 2.65 per cent, having cut its seven-day lending rate earlier in the week by the same amount, which was its first move to boost short-term liquidity in the country’s interbank market in nine months.

Data released alongside the announcement underscored the slowing pace of China’s economic recovery. Growth in industrial output and retail sales fell short of economists’ expectations, while the pace of contraction in property investment and sales also worsened in May.

In currency markets, the renminbi weakened as much as 0.3 per cent against the dollar to Rmb7.1807 after the central bank cut, taking the currency about 4 per cent lower against the greenback for the year to date and to a fresh six-month low.

Analysts were sceptical that the cut to the medium-term rate, which serves as the floor for China’s benchmark prime loan rate, would be enough to get growth back on track.

“The underlying story on the economy is extremely disappointing right now,” said Robert Carnell, head of Asia-Pacific research at ING. He said the renminbi could weaken to Rmb7.2 against the dollar “in days” and that policymakers would regard a weaker currency “as one of the policy tools they will need to lean on to help the economy”.

The gains in Asia followed a choppy day on Wall Street, where the benchmark S&P 500 finished 0.1 per cent higher and the tech-focused Nasdaq Composite rose 0.4 per cent after the Fed’s widely anticipated decision to leave the federal funds rate untouched on Tuesday.

But the pause at a range of 5 to 5.25 per cent, after a string of rate rises over the course of 14 months, came alongside Fed officials’ forecasts that indicated most policymakers expect two more quarter-point rises this year.

Economist Brian Martin at ANZ described the Fed’s decision as a “hawkish skip”, noting that while “there are some encouraging signs that inflation intensity is subsiding, it is way too early to conclude that inflation is defeated amid a still strong labour market”.

The hawkish outlook bolstered the dollar in Asian trading, with the dollar index tracking the US currency against a basket of other currencies climbing 0.3 per cent.

Futures markets tipped the S&P 500 to open flat later in the day, while the FTSE 100 was expected to shed 0.3 per cent at the start of trading in London.