China cuts lending benchmarks to arrest economic slowdown

China cut its benchmark lending rates on Monday, adding to easing measures announced last week, as Beijing steps up efforts to spur credit demand in an economy hobbled by a property crisis and a resurgence of COVID infections.

China cut its benchmark lending rates on Monday, adding to easing measures announced last week, as Beijing steps up efforts to spur credit demand in an economy hobbled by a property crisis and a resurgence of COVID infections. The one-year loan prime rate (LPR) was lowered by 5 basis points to 3.65% at the central bank's monthly fixing, while the five-year LPR was slashed by a bigger margin of 15 basis points to 4.30%.

In a Reuters poll conducted last week, 25 out of 30 respondents predicted a 10-basis-point reduction to the one-year LPR. All of those in the poll also projected a cut to the five-year tenor, including 90% of them forecasting a reduction larger than 10 bps. Most new and outstanding loans in China are based on the one-year LPR, which is now loosely pegged to the central bank's medium-term lending facility (MLF) rate, while the five-year rate influences the pricing of mortgages.