China cuts interest rates on loans as economic growth slows

China cuts interest rates on loans as economic growth slows

The People's Bank of China (BPC) has cut this Monday the reference interest rates applied to bank loans at one and five years, which will go to 3.65% in the case of twelve-month loans and in 4.3% in longer-term loans, of reference for mortgages, as announced by the institution.

In the case of the reference rate for five-year loans, the rate cut of 15 basis points from 4.45% has exceeded the expectations of the market consensus and equals the record reduction of the reference undertaken by the central bank last May in response to the real estate crisis that threatens the recovery of the Chinese economy.

For its part, the People's Bank of China has lowered the reference rate for one-year loans by five basis points, which will go from 3.7% to 3.65%.

"Today's reductions continue the PBC's efforts to support a faltering economy. We expect further easing in the coming months, but policymakers still seem reluctant to engineer a sharp rebound in credit growth," said Sheana Yue, China economist at consultancy Capital Economics.

In this sense, the expert highlights that, although the adjustments had been widely anticipated after the cut in the rate for medium-term loans last week, the drop in the one-year reference rate was less than what most expected. of analysts surveyed by Bloomberg, while the cut to the five-year rate exceeded most expectations.

"The much larger cut to the five-year rate suggests that the PBOC is particularly concerned about problems in the housing market," it adds.

A week ago, the institution had already announced reductions of 10 basis points in medium-term loan facilities (MLF) and reverse repurchase agreements ("repos"), important financing tools of the banking system.

Source link