LPR falls for the first time this year to help the economy continue to recover
On June 20, the new loan market quotation rate (LPR) was released, and the LPRs with a term of 1 year and a term of more than 5 years both decreased by 10 basis points compared with the previous period. This is the first adjustment of the LPR since August 2022.
Analysts pointed out that the interest rate cut ended the previous 9 consecutive period of “standstill”, which is in line with market expectations and will bring multiple benefits.
In line with market expectations
The LPR cut is in line with market expectations. LPR downlink has the foundation and space. The decline in policy interest rates and deposit rates has jointly promoted the decline in the cost of bank liabilities, opening up space for the decline in LPR.
LPR downlink meets actual needs. At present, China’s economy is still facing relatively large downward pressure. Interest rate cuts will help stabilize employment, expand investment, promote consumption, and enhance debt sustainability. It will help restore confidence, stabilize market expectations, and further change enterprises and residents. Sectoral investment and financing preferences.
Bring multiple benefits
“The decline in policy interest rates has led to a decline in the quotations of the two types of LPR this month, which will effectively drive down the actual loan interest rate and reduce financing costs, thereby stimulating credit demand and enhancing the growth momentum of consumption and investment.” Zeng Gang, director of the Shanghai Finance and Development Laboratory, said. In general, the reduction of LPR will bring multiple benefits to the credit market, the real estate market, and the overall economic situation.
Stimulate more financing needs. Reducing LPR can reduce loan interest rates, thereby stimulating the financing needs of market players.
Boost confidence in the real estate market. The reduction of residential mortgage interest rates will reduce the cost of residential loans, which will help boost market confidence, promote the stable and healthy development of the real estate industry, and then drive the gradual recovery of real estate investment.
Transmitting policy signals for stabilizing growth and promoting development. The end of the LPR unchanged for many consecutive months reflects that the monetary policy is more precise and powerful, which will help to further stabilize market expectations and boost market confidence.
Continue to implement prudent monetary policy
The executive meeting of the State Council held on June 16 made it clear that in response to changes in the economic situation, more forceful measures must be taken to enhance the momentum of development, optimize the economic structure, and promote the continued economic recovery.
Yi Gang, Governor of the People’s Bank of China, pointed out during his investigation in Shanghai that China’s economy has strong resilience, great potential, and sufficient policy space. The People’s Bank of China will continue to implement a prudent monetary policy accurately and forcefully, strengthen counter-cyclical adjustments, fully support the real economy, and maintain currency and financial stability.
Overall, the LPR cut is expected to have a positive impact on the economy, stimulating financing needs, boosting confidence in the real estate market, and transmitting policy signals for stabilizing growth and promoting development. The People’s Bank of China will continue to monitor the economic situation and take necessary measures to support the recovery and growth of the economy.Title: LPR Falls for the First Time This Year to Help the Economy Continue to Recover
Introduction:
On June 20, the People’s Bank of China announced a decrease in the loan market quotation rate (LPR), with both the 1-year and 5-year-plus LPRs falling by 10 basis points compared to the previous period. This marks the first adjustment of the LPR in 2023 and is expected to have a positive impact on the economy’s recovery.
Market Expectations and Benefits:
The reduction in LPR is in line with market expectations and is seen as a significant step in deepening the market-oriented reform of interest rates. The LPR serves as the “anchor” for loan interest rate pricing, replacing the benchmark loan interest rate. Analysts believe that the interest rate cut will bring multiple benefits to the economy.
Firstly, the decline in LPR will effectively drive down actual loan interest rates, reducing financing costs and stimulating credit demand. This, in turn, will enhance the growth momentum of consumption and investment, benefiting the credit market and the overall economic situation.
Secondly, the reduction in LPR will boost confidence in the real estate market. LPR with a term of more than 5 years is linked to housing loans, and the lowered LPR will lead to a drop in residential commercial loan interest rates. This will reduce the cost of residential loans, promote market confidence, and contribute to the stable and healthy development of the real estate industry.
Lastly, the LPR downregulation sends policy signals for stabilizing growth and promoting development. The adjustment reflects the precision and power of monetary policy, helping to stabilize market expectations and boost confidence.
Continued Implementation of Prudent Monetary Policy:
The executive meeting of the State Council emphasized the need for forceful measures to enhance development momentum and promote economic recovery. The People’s Bank of China will continue to implement a prudent monetary policy accurately and forcefully, strengthening counter-cyclical adjustments and supporting the real economy. The aim is to maintain reasonable and sufficient liquidity, promote a decline in comprehensive financing costs, and ensure currency and financial stability.
Conclusion:
The decrease in LPR, the first adjustment this year, is expected to support the ongoing recovery of China’s economy. By reducing financing costs, stimulating credit demand, boosting confidence in the real estate market, and sending positive policy signals, the LPR downregulation aims to promote stable and sustainable economic growth. The People’s Bank of China remains committed to implementing prudent monetary policy and supporting the real economy in the second half of the year.
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Erest rates and reduce financing costs, which will stimulate credit demand and enhance the growth momentum of consumption and investment. This will support the stabilization of employment, expansion of investment, promotion of consumption, and improvement of debt sustainability. It will also restore confidence, stabilize market expectations, and encourage investment and financing preferences among enterprises and residents.
Furthermore, the reduction of LPR will stimulate financing needs by reducing loan interest rates, making it more attractive for market players to seek financing. This will support businesses in obtaining the necessary capital for expansion and investment.
Additionally, the decrease in residential mortgage interest rates will reduce the cost of residential loans, which is expected to boost confidence in the real estate market. This will promote the stable and healthy development of the real estate industry, leading to a gradual recovery of real estate investment.
The adjustment of LPR rates also serves as a policy signal, indicating the government’s commitment to stabilizing growth and promoting development. The previous period of unchanged LPR rates reflected the precision and effectiveness of monetary policy. The decrease in LPR now further stabilizes market expectations and boosts confidence in the economy.
Continued Prudent Monetary Policy:
The People’s Bank of China has reiterated its commitment to implementing a prudent monetary policy accurately and forcefully. This policy approach aims to enhance the momentum of development, optimize the economic structure, and support the continued economic recovery.
Governor Yi Gang highlighted the strong resilience, potential, and policy space of China’s economy. The central bank will continue to closely monitor the economic situation and take necessary measures to support the recovery and growth of the economy, while ensuring currency and financial stability.
In conclusion, the decrease in LPR rates is expected to have a positive impact on the Chinese economy. It will stimulate financing needs, boost confidence in the real estate market, and transmit policy signals for stabilizing growth and promoting development. The People’s Bank of China remains committed to implementing a prudent monetary policy to support the recovery and growth of the economy.
This decrease in LPR by 10 basis points is an encouraging sign for the economic recovery as it will likely stimulate more borrowing and investment, ultimately boosting overall economic growth.
This significant decrease in LPR is a promising sign for economic recovery. It will effectively boost the loan market, driving lending rates down and encouraging borrowing, ultimately stimulating economic growth.