The Central Bank of China trimmed two key interest rates this Tuesday, June 20, after taking similar measures last weekin a new attempt to counter the slowdown of its economy, the second largest in the world.
One of the key rates is the one-year LPR prime ratewhich serves as rreference for business loanswas reduced from 3.65% to 3.55%reported the People’s Bank of China (BPC, central) in a statement.
The other reference value that was modified was the 5-year LPRwhich is used in mortgages. this fell to 4.2% from 4.3%.
Very followed by the markets, these two guys are now in their historic apartment. They had been reduced the last time in August 2022.
This decision, anticipated by the markets, aims to encourage commercial banks to grant more credit and at more advantageous rates. The measure should therefore allow support activity in a context of economic slowdown.
Measures to boost the Chinese economy
the long awaited post Covid-19 recovery in Chinabehind the lifting of sanitary restrictions at the end of 2022, tends to peter out in recent weeks and barely materializes in some sectors.
For revitalize the economyhe The Central Bank had already reduced the rate for its medium-term loans last Thursday to financial institutions (MLF). A measure that would allow to inject 237,000 million yuan (30,600 million euros) in the economy.
Previously, the entity had adjusted the main interest rate for short-term liquidity loans (seven days) to commercial banks.
These recent announcements “clearly show that political leaders are increasingly concerned about the economy”affirmed this Tuesday in a note the economists Julian Evans-Pritchard and Zichun Huangof the signature Capital Economics.
“Support for growth now comes before other considerations, such as bank profitability” but “a sharp acceleration in the number of loans remains unlikely and the recovery will continue to depend mainly on the service sector,” they point out.
The economy is affected by the over-indebtedness of the real estate sector (a traditional pillar of growth), a consumption at half mast in a context of uncertainty in the labor market and the global economic slowdownwhich weighs on the demand for Chinese goods.
Source: Ambito
