The People’s Bank of China (PCB, the Chinese central bank) announced today that it will lower its reference rate for loans by five basis points, from 3.7% to 3.65%.

The reference rate for credits (LPR, acronym in English) to one year had registered its last variation last January, when the central bank cut it from 3.8%.

Likewise, the institution announced a reduction of 15 basic points, from 4.45% to 4.3%, for the five-year LPR, after experiencing a similar reduction in May.

These decisions meet the expectations of analysts and investors that the BPC would move in the face of data that show a slowdown in the recovery of the national economy.

A week ago, the institution had already announced reductions of 10 basis points in medium-term loan facilities (MLF) and reverse repurchase agreements (“repos”), important financing tools of the banking system.

The LPR is calculated from the price contributions of a series of banks -including small lenders that tend to have higher financing costs and greater exposure to non-performing loans-, and aims to lower borrowing costs and support the “real economy”.

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