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China cuts key interest rate

By Michele Maatouk

Date: Friday 20 May 2022

China cuts key interest rate

(Sharecast News) - The People's Bank of China cut a key lending benchmark on Friday by the most on record as it looks to support a slowing economy and support housing demand.
The Bank cut the five-year loan prime rate - its mortgage reference rate - by a bigger-than-expected 15 basis points, to 4.45%, and left the one-year rate unchanged at 3.7%.

Analysts had been expecting a five basis points reduction across both tenures.

Danske Bank said: "The Chinese housing market has been under pressure for several months and both home sales and prices are declining. Additionally, the rest of the economy is under pressure from Covid-19 lockdowns.

"Unlike Western central banks, PBoC is in easing mode, which eventually should support global growth, all else equal."

Julian Evans-Pritchard, senior China economist at Capital Economics, said: "Today's reduction to the five-year loan prime rate (LPR) should help drive a revival in housing sales, which have gone from bad to worse recently.

"But the lack of any reduction to the one-year LPR suggests that the PBoC is trying to keep easing targeted and that we shouldn't expect large-scale stimulus of the kind that we saw in 2020."

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