(CNBC) The People’s Bank of China has cut its one-year loan prime rate by 10 basis points to 3.7% from 3.8% as concerns of economic slowdown linger.
The central bank also reduced its five-year loan prime rate by 5 basis points to 4.6%., the first reduction since April 2020.
The reduction of loan prime rates, which affects lending, is expected to make China’s mortgages cheaper, which could spur housing demand.
Nomura’s Chief China Economist Ting Lu is still cautious and says the impact of the LPR cut will be limited since the reduction is too small to clear up bottlenecks.
Lu expects PBOC to reduce rates on one-year and five-year loans further, projecting the central bank to engage in forex purchases to limit the appreciation of the renminbi and boost liquidity.
The latest move by PBOC comes days after the central bank also reduced its interest rate on one-year policy loans by ten basis points as focus shifts on salvaging the in-crisis property market and boosting domestic consumption.
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