SHANGHAI, – China cut key mortgage interest rates on Thursday as monetary authorities stepped up efforts to boost the economy in the face of a slowing economy.
One- and five-year lending prime rates (LPRs) were lowered on Monday, just days after the central bank’s deputy governor signaled new moves, following China’s central bank’s surprising cuts in its short and medium term loan rates. .
Many analysts say the asset sector easing will continue into 2022, with Omicron’s expansion variant curbing consumer activity, while other major economies, including the United States, appear to be tightening monetary policy this year.
December economic data showed further weakness in the real estate and consumer sectors. read more
In a monthly correction on Thursday, China lowered its one-year credit prime rate (LPR) by 10 basis points to 3.70% from 3.80%. The five-year LPR was cut by 5 basis points from 4.65% to 4.60%, the first cut since April 2020.
Liu Guoqiang, deputy governor of the People’s Bank of China, said on Tuesday that China’s central bank “needs to act quickly, move beyond the market curve, and respond in a timely manner to common market concerns.” Market expectations of further stimulus. read more
All 43 participants in a Snap Reuters poll predicted the one-year LPR would drop for the second month in a row. Of those, 40 respondents predicted a reduction in the five-year rate. read more
The 5-year rate cut, “Chinese officials are eager to reduce the cost of borrowing, so overall credit growth is expected to ease pressure on the macro economy after the spring festival,” said Marco Sun, President. Financial Analyst at MUFG.
“China’s monetary policy still has some room to relax in the first half of this year, depending on the outcome of the policy transfer and the growth target set by the annual parliamentary session in March.”
Stocks and values of asset companies soared on Thursday following the LPR recession, with investors hoping that this and other recent government measures would ease the financial crisis in the sector. read more
Sheena Yu, a Chinese economist at capital economics, expects a further 20 bps cut in the one-year LPR for the first half of this year.
The interest rates (MLF) of the medium-term lines of credit act as a guide for the LPR. Market participants believe that moves to LPR should reflect changes in MLF rates.
Most new and outstanding loans in China are based on a one-year LPR. The five-year rate affects the price of mortgages.