2023-06-19 22:28:36 ET
- China cut its two key benchmark lending rates on Tuesday amid multiple challenges facing its slowing economy.
- The one-year loan prime rate (LPR) on which most new and outstanding loans are based was cut from 3.65% to 3.55%, the People’s Bank of China (PBOC) confirmed.
- The five-year LPR, which is a reference rate for mortgages, was also cut from 4.3% to 4.2%.
- The moves are seen as an attempt to revive credit demand and fire up the economy as the world's second-largest economy post covid recovery loses steam.
- One of the most economic downturn highlights has been the unemployment rate for Chinese aged from 16 to 24, which rose to a record of 20.8% in May. Retail Sales also cooled to 12.7% after gaining 18.4% in the prior month and reported way below 13.7% consensus. Industrial production growth slowed to 3.5% from 5.6% earlier, even falling short of 3.8% consensus.
- In a surprise move, the central bank had lowered the seven-day repo rates on June 13th, 2023 by 10 bps to 1.9% and reduced the one-year medium-term lending facility (MLF) rate on June 15th (to 2.65%, from 2.75% previously). The market had, however, fully expected the LPR to decrease on the 20th, owing to the LPR's direct link to the MLF.
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China cuts two key lending benchmark interest rates to prop up slowing economy