China cuts benchmark loan rate for first time in almost 2 years amid mounting economic pressures
- The one-year loan prime rate (LPR) was cut from 3.85 per cent to 3.8 per cent, the People’s Bank of China (PBOC) said on Monday
- The five-year LPR, which is the reference for mortgages, remained at 4.65 per cent
China cut its benchmark lending rate for the first time in almost two years on Monday providing support to an economy showing strain from a property slump and sporadic coronavirus virus outbreaks.
The one-year loan prime rate (LPR) – on which most new and outstanding loans are based – was cut from 3.85 per cent to 3.8 per cent at the December fixing, while the five-year LPR – which is a reference for mortgages – remained at 4.65 per cent, according to the People’s Bank of China (PBOC).
The LPR has been considered China’s de facto benchmark funding cost since 2019. The rate is decided by a group of 18 banks and is reported in the form of a spread over the interest rate of the central bank’s medium-term lending facility.
It had remained unchanged for 20 months having last been adjusted in April 2020, when the one-year LPR was cut from 4.05 per cent to 3.85 per cent.
“The People’s Bank of China authorised the National Interbank Funding Centre to announce that on December 20, 2021, the market quoted interest rate (LPR) for loans is 3.8 per cent for one-year LPR and 4.65 per cent for five-year or longer LPR. The above LPR is valid until the next LPR is issued,” said the PBOC statement on Monday.