China cut its benchmark loan prime rate on Monday, a move that will provide more support for the slowing economy after the central bank lowered two other key policy rates last week.
China’s one-year loan prime rate, which is offered to banks’ best clients, was lowered to 3.65% from 3.7%, while the five-year LPR was cut to 4.3% from 4.45%, the People’s Bank of China said in a monthly release.
Beijing last lowered its one-year LPR in January, and last cut its five-year LPR rate, which is used to price longer-term loans such as mortgages, in May.
The LPR reductions were widely expected after the PBOC last week surprised the market by slashing borrowing rates on its medium-term lending facility by 10 basis points. The PBOC determines its benchmark LPR using interest rates offered by 18 Chinese commercial banks to their best customers-rates that are themselves based on prevailing rates offered through the medium-term lending facility.
The central bank’s moves come in response to weaker-than-expected readings of economic activity and new credit in July. Across the board, economic indicators on consumption, industrial production, youth unemployment and investment have slowed more sharply than expected as the country’s post-lockdown recovery sputtered.