Beijing: China cut its benchmark lending rates after the central bank lowered interest rates at the end of September as part of a series of measures aimed at reviving economic growth and halting a housing market crash.
The one-year loan prime rate (LPR) was lowered to 3.10% from 3.35%, while the five-year LPR was reduced to 3.60% from 3.85%.
The size of the cut is at the upper bound of the 20 to 25 basis points range forecast by People’s Bank of China (PBoC) governor Pan Gongsheng in speeches since late September, and bigger than the 20 basis point reduction projected by all 17 economists surveyed by Bloomberg.
The cuts to the LPR – which is set by a group of big banks – come after the PBoC outlined steps last month to encourage households and companies to borrow more.
The measures include lowering interest rates and unlocking liquidity to encourage bank lending.
The offshore yuan was nearly flat at around 7.12 per US dollar.
The 30-year government bond yield was little changed at 2.3% amid thin trading.
The PBoC has signalled more easing is on the cards.
Pan reiterated last Friday that the central bank may lower the reserve requirement ratio – which frees up cash for banks to lend – by another 25 to 50 basis points by the end of the year based on the liquidity situation.
The “market likely looks past this expected LPR cut, and forward to the prospect of more easing”, said Frances Cheung, head of foreign exchange and rates strategy at Oversea-Chinese Banking Co. — Bloomberg
