China cut its benchmark lending rate as expected on Monday to reduce borrowing costs for companies and prop up the coronavirus-hit economy, after it contracted for the first time in decades, reported Reuters.
The one-year loan prime rate (LPR) was lowered by 20 basis points (bps) to 3.85% from 4.05% previously, while the five-year LPR was cut by 10 bps to 4.65% from 4.75%.
The move was the second cut to the lending benchmark rate this year, and the latest reduction in one of China’s key lending rates. Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages.
“The asymmetric cut suggests that the authorities will stick to the tight housing policy,” said Xing Zhaopeng, markets economist at ANZ in Shanghai. “It will not be deemed as a tool to stimulate domestic demand, even at this difficult time.”