MNI BRIEF: China Loan Prime Rate Cut Smaller Than Expected

China's one-year Loan Prime Rate was cut to 3.45% from 3.55% on Monday to guide down funding costs, but the reduction was smaller than expected as five-year LPR remained stable.

The cut to the one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 18 banks, was the second reduction this year, while the five-year plus maturity remained unchanged at 4.2%, according to a People's Bank of China statement.

The reduction followed the PBOC's cut to the Medium-lending Facility by 15bps to 2.5% and the seven-day reverse repo rate by 10 bps to 1.80% last Tuesday. (See MNI PBOC WATCH: Data-Driven PBOC Cuts Could Push LPR Lower) However, market players had expected a 15bp cut, particularly to the five-year rate, to boost the real-estate market. Policy advisors and economists are expected to unveil further stimulus to bolster real estate, consumption and investment to sooth concerns over the recovery's sustainability (see: MNI: PBOC Rate Cut Expectations Build After Deposit Cuts).