China attempts to bolster growth in its slowing economy by lowering LPR to 3.80% from 3.85%.
Remains wary of loosening conditions in its highly leveraged property market.
Move highlights China’s monetary policy divergence from other major central banks, which are set to raise interest rates.
SHANGHAI: China, for the first time in 20 months, has cut its benchmark interest rate in a bid to bolster growth in the slowing economy, though remaining wary of loosening conditions in its highly leveraged property market.
The one-year loan prime rate (LPR) was lowered by 5 basis points to 3.80% from 3.85% previously, while the five-year LPR remained at 4.65%.
The reduction marks the first LPR cut since April 2020.
Twenty-nine out of the 40 traders and economists polled by Reuters last week predicted cuts in LPR.
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 cut reinforces our view that authorities are increasingly open to cutting interest rates amid looming economic headwinds,” said Xing Zhaopeng, senior China strategist at ANZ.
However, he noted the decision to keep the five-year rate unchanged showed Beijing preferred “not to use the property sector to stimulate economic growth.”
Some analysts said the central bank’s two reserve requirement ratio (RRR) cuts this year have allowed institutions to lower their costs of lending, with the two cuts saving banks up to 28 billion yuan ($4.39...
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