China lowered its benchmark lending rates by 25 basis points on Monday following reductions to other policy rates last month as part of a package of stimulus measures to revive the economy.
The central bank cut the one-year loan prime rate (LPR) to 3.1 percent and the five-year LPR to 3.6 percent, the People’s Bank of China (PBOC) said. The central bank last cut lending rates in July.
Banks’ reserve requirement ratio to decline
The one-year lending rates influence corporate loans and most household loans in China. Meanwhile, the five-year LPR serves as a benchmark for mortgage rates.
Markets largely expected the lending rates cut following Central Bank governor Pan Gongsheng’s comments on Friday during a forum in Beijing where he said that China’s loan prime benchmark rates will decline by 20 to 25 basis points.
During the forum, Pan also said that banks’ reserve requirement ratio could decline by another 25 to 50 basis points by the end of the year, depending on the liquidity situation. Pan also noted that the central bank will cut the seven-day reverse repurchase rate by 20 basis points and the medium-term lending facility rate by 30 basis points.
Last month, China’s central bank trimmed its reserve requirement ratio by 50 basis points. The move came as the central bank released several support measures that seek to support the world’s second-largest economy, which is facing a property crisis and weak consumer sentiment.
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Economic growth improves marginally
Retail sales and industrial production picked up in September.
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