China lowers 1-year loan rate to a record low of 3.45%

MG News | August 21, 2023 at 10:01 AM GMT+05:00

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August 21, 2023 (MLN): The People’s Bank of China (PBoC) unexpectedly lowered its 1-year loan prime rate (LPR) by 10 bps to a record low of 3.45% to support its economy which is facing new threats from a deteriorating housing market and low consumer spending, the latest data issued by the PBoC showed today.

Moreover, it also surprised markets by holding the 5-year rate steady at 4.2%.

The 5-year rate is a reference for mortgages.

Market consensus was that of a larger rate cut by the Central Bank this time.

Chinese stocks fell following this decision, with the Hang Seng Index falling as much as 1.78% and is currently down 0.92%, heading for its lowest close since November.

The loan market quotation rate (LPR) is quoted by each quotation bank based on the open market operation rate (mainly refers to the medium-term lending facility rate) plus points, and is calculated by the National Interbank Funding Center to provide pricing reference for bank loans.

At present, LPR includes two varieties with a period of 1 year and a period of more than 5 years.

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