China’s Central Bank Cuts One-Year Loan Prime Rate, Leaves Five-Year Rate Unchanged
In a move that fell short of expectations, China’s central bank, the People’s Bank of China (PBOC), announced a cut to its one-year loan prime rate on Monday. The decision comes as the country’s economy faces faltering growth momentum and increasing concerns over deflation risks.
The PBOC reduced the one-year loan prime rate, which serves as the benchmark for most household and corporate loans in China, by 10 basis points from 3.55% to 3.45%. This cut was slightly lower than the anticipated 15 basis point reduction predicted in a Reuters poll. It marks the second time in three months that China has lowered this rate.
However, the PBOC decided to leave its five-year loan prime rate, which is the benchmark for most mortgages, unchanged at 4.2%. Economists had expected a 15 basis point cut for this rate.
The central bank’s actions on Monday follow surprise cuts to its short- and medium-term lending rates last week. These cuts were prompted by weak credit growth and emerging deflation risks, which have raised concerns about the pace of China’s economic slowdown.
Investors and policymakers are also growing increasingly worried about default risks in the real estate sector and missed payments on shadow banking-linked trust products.
In addition to the rate cuts, the PBOC lowered the rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility loans to certain financial institutions. The rate was reduced by 15 basis points to 2.50% from 2.65% previously. The overnight, seven-day, and one-month standing lending facility rates were also trimmed by 10 basis points each to 2.65%, 2.8%, and 3.15%, respectively.
These moves by the PBOC reflect the central bank’s efforts to support the economy and mitigate the risks posed by slowing growth and potential defaults. However, the decisions have fallen short of market expectations for more aggressive policy intervention.
As the situation continues to evolve, it is advised to stay updated for any further developments.
This is breaking news. Please check back for updates.
How does the People’s Bank of China’s decision to leave the five-year loan prime rate unchanged affect the mortgage market in China
China’s central bank, the People’s Bank of China (PBOC), has announced a cut to its one-year loan prime rate in an effort to boost the country’s faltering economy. However, the move has fallen short of expectations, as the rate cut was slightly lower than anticipated. The one-year loan prime rate, which serves as the benchmark for most household and corporate loans in China, was reduced by 10 basis points to 3.45%. This marks the second time in three months that China has lowered this rate. In contrast, the PBOC decided to leave its five-year loan prime rate, which is the benchmark for most mortgages, unchanged. The central bank’s actions follow surprise cuts to its short- and medium-term lending rates last week, as weak credit growth and emerging deflation risks raise concerns about China’s economic slowdown. The PBOC’s moves reflect its efforts to support the economy and mitigate risks, but they have not met market expectations for more aggressive policy intervention. Stay updated for further developments on this issue.
I hope this rate cut helps revive China’s economy and stimulate growth.
It’s a proactive move by the central bank to address economic concerns and prevent a slowdown.