China’s Central Bank cut its benchmark lending rates today. The lastest move by PBOC is seen to shore up a slowing economy adversely affected by a property crisis and Covid curbs.
The PBOC (People’s Bank of China) said the one-year loan prime rate (LPR) was cut from 3.7 to 3.65 per cent at the August fixing. Whilst five-year LPR was also cut from 4.45 to 4.3 per cent.
The latest trim is seen as a “fast reaction” following last week’s cut of medium-term lending facility loans to improve banks’ liquidity.
After a monthly meeting, The People’s Bank of China lowered the one-year loan prime rate by 5 basis points to 3.65% from 3.7%, while the five-year rate was cut by 15 basis points to 4.3% from 4.45%.
The world’ second largest economy only grew by 0.4% in the 2Q2022 as the zero-COVID and its curbs weighed on consumption and industrial activities.
In China, most new and outstanding loans are based on the one-year loan prime rate, which is now loosely pegged to the central bank’s medium-term lending facility rate. The five-year rate, on the other hand, influences the pricing of mortgages.