The People’s Bank of China (PBOC) lowered the 1- and 5-year Loan Prime Rates by 10 basis points to 3.55 percent and 4.20 percent, respectively.
However, this discount is in line with the Bloomberg survey estimates. under took place.
The median expectation of economists surveyed was that interest rates would be lowered to 3.55 percent and 4.15 percent, respectively. The 5-year reference base interest rate is a benchmark for mortgage loans in the country. Some analysts were of the opinion that the 5-year reference base rate could be lowered further due to the problems in the housing sector.
Although Chinese banks lowered loan rates after the PBOC’s decision, some analysts considered the discount rate disappointing.
Bruce Pang, Chief Economist of China at Jones Lang LaSalle, said: “The same rate cut in both 1-year and 5-year rates shows that policy makers want to avoid giving an overly optimistic signal about the real estate market, in line with the ‘housing is for living, not speculating’ principle.
Ken Cheung, Currency Strategist at Mizuho Bank Asia, stressed that the 10 basis point cut in the 5-year LPR has been a bit of a disappointment to those expecting a strong incentive to revive the troubled housing sector.