The latest Chinese data highlighted that the economy is under pressure from several fronts. That prompted Beijing to cut key interest rates to stimulate the economy, but analysts say more support is needed to boost growth.
Thus, the Chinese central bank unexpectedly cut key interest rates for the second time in three months.
China’s central bank cut the interest rate on medium-term loan facilities (MLF), one-year loans granted to financial institutions, by 15 basis points to 2.5 percent. China’s Bureau of Statistics showed on Tuesday that retail sales, industrial production and investment grew more slowly than expected, indicating that the business and consumption drivers of the world’s second-largest economy are notably underperforming.
This isn’t the first time they’ve relaxed
Tuesday’s decision paved the way for lowering the benchmark interest rate (loan prime rate/LPR) for 1- and 5-year loans. The one-year LPR acts as a guideline for other banks in setting new and pending interest rates on loans, while the five-year LPR forecasts interest rates on mortgage loans. LPR’s monthly recording is scheduled for next Monday.
LPR became the new standard in August 2019 after the interest rate reform from the Chinese central bank. From 2020, the central bank will require banks to use the LPR as a basis when setting interest rates for new loans. In June, the central bank cut the LPR from 3.65 percent to 3.55 percent to support the economy, but since then macro data has become weaker, MTI concluded. Reuters Based on.
