People’s Bank of China cuts rates on 1-year and 5-year LPRs in hopes of spurring economic recovery

The People’s Bank of China (PBOC) cut the one-year good customer loan (LPR) rate by 0.05% from 3.7% to 3.65% and the five-year LPR rate by 0.15% from 4.45% to 4.30% on the day. The aim is to help the economy recover after the domestic economy was hit hard by the Covid-19 epidemic and the collapse of the housing market.

China’s 1-year LPR is a measure of private lending rates, and the 5-year LPR is an index that measures the direction of household interest rates, including mortgage rates.

Previously, analysts had predicted that the People’s Bank of China would cut the 1-year LRP rate by 0.10% and the 5-year LRP rate by more than 0.10%.

The cut in the LPR rate came after the People’s Bank of China (PBOC) lowered the one-year medium-term lending (MLF) rate, China’s benchmark interest rate, by 0.10% to 2.75% on August 15.

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