CHINESE banks lowered the benchmark rate for new loans, following a series of policy-loosening steps by the central bank aimed at cushioning the economic impact of the coronavirus outbreak.
The one-year loan prime rate was set at 3.85% versus 4.05% in March, according to a statement from the People’s Bank of China on Monday. Some analysts had expected a cut of 20 basis points after the central bank trimmed several of its policy rates since the last LPR was set in March, and added liquidity to the financial system. The five-year tenor, a reference for mortgages, was cut to 4.65% on Monday versus 4.75% in March.
"The LPR cut means banks are increasingly prepared to extend more affordable loans as their funding costs are lowered,” said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp."More easing is likely to come with a view to engineering a recovery in economic activity.” The rate cuts come after China last week lowered the cost it charges on its 1-year funding to banks to a record low.
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