China lowered its one-year and five-year prime loan rates by 10 basis points each for the first time since August.
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 reduction was below the Bloomberg survey estimates.
The median expectation of economists surveyed was that interest rates would be lowered to 3.55 percent and 4.15%, respectively. The 5-year reference base interest rate is a reference 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 for 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 principle that housing is for living, not speculation.”
Ken Cheung, Currency Strategist at Mizuho Bank Asia, stressed that the 10 basis point cut in the 5-year LPR has been somewhat disappointing to those expecting a strong incentive to revive the troubled housing sector.