The People's Bank of China (PBOC) has cut both the one-year and five-year loan prime rates in an effort to stimulate the struggling Chinese economy. This move comes as recent economic data, including retail sales and industrial production, has shown signs of improvement.
The People's Bank of China said it would cut the one-year loan prime rate to 3.1%, while the five-year LPR has been trimmed to 3.6%.
The one-year LPR influences corporate loans and most household loans in China, while the five-year LPR serves as a benchmark for mortgage rates.The People's Bank of China said it would cut the one-year loan prime rate to 3.1%, while the five-year LPR has been trimmed to 3.6%. The one-year LPR influences corporate loans and most household loans in China, while the five-year LPR serves as a benchmark for mortgage rates.Pan Gongsheng had indicated on Friday during a forum held in Beijing
During the forum, Pan also said that the amount of cash that banks need to have on hand, also known as the reserve requirement ratio or RRR, could be lowered by another 25 to 50 basis points by the end of the year, depending on the liquidity situation. The seven-day reverse repurchase rate will be cut by 20 basis points, while the medium-term lending facility rate will be lowered by 30 basis points, Pan also highlighted.
While the loan prime rate cuts were expected, it does confirm that monetary stimulus is at least"occurring on a significant basis in China," said Shane Oliver, head of investment strategy and chief economist at AMP. However, he noted that the cut alone is insufficient to lift the country's economy, reiterating calls for more fiscal stimulus."The cost of money, the supply of money, is not the real issue in China.
China Economy Loan Prime Rates PBOC Stimulus
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