China cuts loan interest rates

China lowered its one-year and five-year prime loan rates by 10 basis points for the first time since August. The People’s Bank of China (PBOC) lowered the one- and five-year reference prime rates (loan prime rates) by 10 basis points to 3.55% and 4.20% respectively. However, these cuts came in below Bloomberg survey estimates. The median expectation of economists participating in the survey was for interest rates to be lowered to 3.55% and 4.15% respectively. The 5-year benchmark prime rate is a benchmark for mortgages in the country. Some analysts had expected the 5-year benchmark prime rate to be lowered further amid concerns in the housing sector. Although Chinese banks lowered their loan rates following the PBOC’s decision, some analysts described the cut rate as disappointing. “The fact that both 1-year and 5-year interest rates were cut by the same amount suggests that policymakers want to avoid giving an overly optimistic signal about the property market, in line with the principle that ‘housing is for living, not speculation,’” said Bruce Pang, chief China economist at Jones Lang LaSalle. Ken Cheung, Asia FX strategist at Mizuho Bank, also emphasized that the 10 basis point cut in the 5-year LPR was a bit disappointing for those expecting a strong stimulus to revive the troubled housing sector.