MNI BRIEF: China LPRs Lowered To Promote Credit Expansion

China’s reference lending rates were lowered on Monday, according to a statement on the People's Bank of China website, with the move coming after the central bank cut key policy rates last week (See: MNI STATE OF PLAY: Analysts See PBOC Point To Lower August LPR)

The one-year Loan Prime Rate was reduced by 5bp to 3.65%, while the five-year Loan Prime Rate fixed 15bp lower, at 4.30%. The steps were slightly out of line with the wider consensus, which looked for at least 10bp cuts to both rates, although there was a clear risk of a larger step for the 5-year benchmark.

The Loan Prime Rates are based on the rate of the PBOC’s Medium-term Lending Facility and quotes submitted by 18 banks.

This was the first reduction since the 5-year LPR unexpectedly fixed lower in May. May's move also took the form of a then record 15bp cut to boost mortgage lending and prop up a sluggish housing market. The 1-year LPR last fixed lower in January, rounding off a cumulative 15bp of cuts observed across December and January, after sitting at unchanged levels for 20 consecutive months.