Chinese central bank cuts prime rate on 1-year loans

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People walk past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China, September 28, 2018.

Jason Lee | Reuters

BEIJING – China’s central bank on Monday lowered its benchmark policy rate for the first time since April 2020, at the height of the coronavirus pandemic in the country.

The People’s Bank of China lowered the one-year prime rate at 3.8%, against 3.85%. The prime rate on five-year loans was unchanged from the previous month at 4.65%.

The last time the central bank cut the LPR to one year and five years was in April 2020, according to data from Wind Information.

The LPR affects the rates of loans to businesses and households. Last week, the central bank’s reduction in the amount of liquidity banks must have in reserve went into effect, marking the second such move this year.

China was the first major economy to shed most of the shock from the pandemic. But this year, especially since July, growth has been held back by subdued consumer spending, Beijing’s zero tolerance policy to control subsequent outbreaks, and tighter regulations, especially in the real estate sector.

At the Chinese government’s Annual Central Economic Labor Conference earlier this month, the country’s top leaders stressed that stability will be a priority for next year.

The meeting concluded that “prudent monetary policies must be flexible and appropriate, and liquidity must be kept at a reasonable and sufficient level,” according to state media.

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