China cuts benchmark loan rate for 1st time in 20 months

22 Dec '21

1 min read

Pic: Nikolay Antonov | Dreamstime.com

China recently cut its lending benchmark loan prime rate (LPR) for the first time in 20 months to boost slowing economic growth despite being wary of loosening conditions in the highly leveraged property market. The one-year LPR was lowered by 5 basis points to 3.8 per cent from the earlier 3.85 per cent, while the five-year LPR remained at 4.65 per cent.

Most new and outstanding loans in China are based on the one-year LPR while the five-year rate influences the pricing of home mortgages.

The widely-expected move to lower the LPR implies China's monetary policy divergence from other major central banks, which are set to raise interest rates, a global newswire reported.

Some analysts expect Beijing could ease further to arrest the economic slowdown, although they remain divided over the easing trajectory, the agency report added.

Meanwhile, on Tuesday, the central bank injected a total of 20 billion yuan in the banking system through reverse repos. The amount included 10 billion yuan at an interest rate of 2.2 per cent, and another 10 billion yuan at 2.35 per cent, the People’s Bank of China said.

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