China on ‘path of further easing’ after cutting mortgage rate in bid to revive economy
- China’s one-year loan prime rate (LPR) was held at 3.7 per cent, the People’s Bank of China (PBOC) said on Friday
- The five-year LPR, which is the reference for mortgages, was cut from 4.6 per cent to 4.45 per cent
China’s sizeable cut to its mortgage reference rate, aimed at reviving the housing market and boosting long-term demand for loans, has raised expectations for further policy easing to save the slowing economy.
The 15 basis points reduction beat expectations, although the central bank’s move to hold the one-year LPR – on which most new and outstanding loans are based – at 3.7 per cent at the May fixing was in contrast with a widely-expected cut by economists.
There’s a room for both monetary and fiscal easing, and it looks like the LPR confirmed they are on that path of further easing
“The economic shock from Covid lockdowns for this year is similar to the economic impact from the initial wave of Wuhan outbreaks in 2020, but the size of stimulus on the monetary side is only a half of the size they did in 2020,” Robin Xing, chief China economist at Morgan Stanley Asia, told a webinar on Friday.
“There’s a room for both monetary and fiscal easing, and it looks like the LPR confirmed they are on that path of further easing.”