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The People’s Bank of China (PBOC) on Monday lowers its benchmark lending rates – Loan Prime Rate (LPR) – for August, with one-year LPR cut to 3.65%, from previous 3.7% and five-year LPR is lowered to 4.3%, from previous 4.45%.
The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks who submit proposed rates to the central bank. Most new and outstanding loans in China are based on the one-year LPR which was last lowered in January. The five-year rate, which was last lowered in May, influences the pricing of home mortgages.
The notable dovish tilt in PBOC’s monetary policy stance came after a slew of key gauges including credit lending data and activity indicators showed the economy unexpectedly slowed in July.
The loss of growth momentum has raised the challenge facing policymakers amid mounting headwinds including a resurgence of local COVID-19 cases, inflationary pressures and a slowing global economy.