Reference Message Network reported on May 21st according to AFP's report on May 20th, the People's Bank of China cut two key interest rates to record lows on May 20th.
According to reports, the People's Bank of China said that the one-year Loan Prime Rate (LPR) dropped from 3.1% to 3.0%. This rate is the benchmark for lending institutions to provide the most favorable interest rates to businesses and households.
The five-year LPR above dropped from 3.6% to 3.5%.
It was reported that these two interest rates were last reduced in October last year, both reaching then-record lows.
It was reported that China and the United States recently agreed to reduce the comprehensive tariff rates on each other's goods, indicating a ceasefire in the brewing trade war between the two economic superpowers.
According to CNBC website on May 20th, China cut the key loan interest rate by 10 basis points on the 20th. The strengthening of the RMB and easing of trade tensions provided China with room for monetary easing to boost the economy.
It was pointed out that this was the first cut since the central bank cut interest rates by 25 basis points in October last year, showing that the Chinese government is stepping up efforts to support the economy.
It was reported that the one-year LPR affects corporate loans and most household loans, while the five-year LPR above serves as the benchmark for mortgage interest rates.
Before the interest rate cut, several state-owned commercial banks took action on the morning of the 20th to reduce deposit rates by up to 25 basis points to protect net interest margins and pave the way for the reduction of key loan interest rates.
Huang Zichun, chief economist at Capital Economics Macro Advisory, said in a report that the People's Bank of China may continue to ease policies.
It was reported that this interest rate cut is part of a package of stimulus measures announced by the Chinese government earlier this month, including cuts in loan interest rates and bank reserve requirements. In addition, the housing provident fund loan interest rate also decreased by 25 basis points.
Due to the weakening of the US dollar, offshore RMB has shed some depreciation pressure and remained relatively stable.
According to Reuters on May 20th, China cut the benchmark loan interest rate for the first time since October last year, while major state-owned banks cut deposit interest rates. The government is working hard to loosen monetary policy to help cushion the impact of the Sino-US trade friction on the economy.
It was expected that the interest rate cut would stimulate consumption and loan growth while protecting the shrinking profit margins of commercial banks.
Despite this, the extent of the interest rate cut was moderate, reflecting the pace of monetary easing in recent years. Analysts explained that policymakers are cautious about taking more aggressive measures when dealing with the trade war with the United States.
(Compiled by Yang Xinpeng and Zhu Jie)
Original article: https://www.toutiao.com/article/7506710487334126099/
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