China cuts lending rate to aid coronavirus-hit economy, but warned it ‘will only provide limited relief’

The one-year loan prime rate (LPR) was lowered by 10 basis points to 4.05 per cent, while the five-year LPR was lowered by five basis points to 4.75 per cent

The cut followed a similar move in the central bank’s medium-term lending rate on Monday as policymakers sought to ease the drag to businesses from the coronavirus

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The loan prime rate (LPR) is a lending reference rate set monthly by 18 banks. The People’s Bank of China revamped the mechanism to price LPR in August 2019, loosely pegging it to the medium-term lending facility rate. Photo: Reuters

Published: 10:27am, 20 Feb 2020Updated: 11:16am, 20 Feb 2020

China cut the benchmark lending rate on Thursday, as widely expected, as the authorities moved to lower financing costs for businesses and support an economy hit by a fast-spreading coronavirus outbreak.

The outbreak has disrupted global supply chains and caused widespread disruption to businesses and factory activity in China, prompting authorities to deliver a steady stream of policy measures over recent weeks to cushion the blow to growth.

The one-year loan prime rate (LPR) was lowered by 10 basis points to 4.05 per cent from 4.15 per cent.

The five-year LPR was lowered by five basis points to 4.75 per cent from 4.80 per cent.

We expect the People's Bank to continue loosening monetary conditions in the coming weeks, especially given signs that the coronavirus disruptions have started to weigh on employment

Julian Evans-Pritchard

All 51 respondents in a Reuters survey had expected a reduction in the LPR, with 38 respondents, or around 75 per cent of participants, tipping a 10 basis points cut to both.