China surprises with modest rate approach
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More news: China has surprised investors by making a modest cut to the 1-year loan rate and leaving the 5-year unchanged, as authorities tread the line between maintaining demand for credit and concerns about a weakening yuan. The one-year loan prime rate (LPR) was eased by 10 basis points to 3.45%, while the five-year LPR was held at 4.20%, compared with analysts' expectations of 3.40% and 4.05% respectively.
China expected to cut lending rates amid weak economic recovery
The news: China’s central bank is expected to cut its core lending rates later on Monday in an effort to revive flagging demand in the economy.
The numbers: A Bloomberg poll of economists expects the People’s Bank of China (PBOC) to cut the one-year loan prime rate by 15 basis points from 3.55%, while the five-year LPR is likely to be cut 15 basis points from 4.2% now.
The context: The one-year and five-year loan prime rates determine borrowing costs for businesses and households. It's expected they will be cut after the PBOC last week unexpectedly lowered the rate on one-year medium-term lending facility (MLF) loans to some financial institutions. The decision comes as policymakers struggle to counter weakening consumer confidence, a property sector slowdown, weaker exports and record youth unemployment since pandemic restrictions were lifted in China early this year.
The sources: Financial Times, Reuters
