China Cuts Borrowing Rate More Than Expected to Revive Housing Sector

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China cut its benchmark reference rate for mortgages by an unexpectedly wide margin on Friday, its second reduction this year as Beijing seeks to revive the ailing housing sector to prop up the economy, Reuters reported. Senior officials have pledged further measures to fight a slowdown in the world's second-biggest economy, hit by COVID-19 outbreaks that prompted stringent measures and mobility restrictions and causing huge disruptions to activity. Many market participants believe Friday's move was also a response to Chinese Premier Li Keqiang's call to decisively step up policy adjustments and let the economy return to normal quickly. "Today's reduction to the five-year Loan Prime Rate should help drive a revival in housing sales, which have gone from bad to worse recently," Julian Evans-Pritchard at Capital Economics said in a note. "But the lack of any reduction to the one-year LPR suggests that the PBOC is trying to keep easing targeted and that we shouldn't expect large-scale stimulus of the kind that we saw in 2020." China, in a monthly fixing, lowered the five-year loan prime rate (LPR) by 15 basis points to 4.45%, the biggest reduction since China revamped the interest rate mechanism in 2019 and more than the five or 10 basis points tipped by most in a Reuters poll. The one-year LPR was unchanged at 3.70%. Read more.
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