China cut its one-year benchmark lending rate on Monday as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged amid broader concerns about a rapidly weakening currency, reports Reuters. The recovery in the world’s second-largest economy has lost steam due to a worsening property slump, weak consumer spending and tumbling credit growth, adding to the case for authorities to release more policy stimulus.
However, downward pressure on the yuan means Beijing has limited room for deeper monetary easing, analysts say, as a further widening of China’s yield differentials with other major economies could trigger yuan selloffs and capital flight.
The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.45% from 3.55% previously, while the five-year LPR was left at 4.20%.
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