China's central bank lowered its benchmark interest rate for the second time this year, cutting the one-year Loan Prime Rate (LPR) by 20 basis points to 3.85 percent and the five-year LPR, used to price mortgages, by 10 basis points to 4.65 percent, as widely expected.
On Feb. 20 the People's Bank of China (PBOC) cut LPR by 10 basis points, brining this year's total cut in LPR to 30 basis points.
It is PBOC's fourth cut in LPR since it was introduced in August 2019 as its new benchmark lending rate and since then China's main lending rate has been cut an effective 50 basis points.
Today's cut in LPR follows a 20 basis point cut in the 1-year medium-term-lending (MLF) rate to 2.95 percent on April 15, the lowest level since it was introduced in September 2014.
In August last year PBOC restructured its method for calculating LPR and set it as a spread to MLF. It also designated LPR as its new benchmark lending rate.
A few days later PBOC set LPR at 4.25 percent, 10 basis points below the previous benchmark lending rate of 4.35 percent.
LPR was then cut 5 basis points in September 2019 and then another 5 points in November 2019, a few weeks after the MLF rate also was cut 5 points.
On Feb. 17 this year MLF was lowered 10 basis points and then a few days later on Feb. 20 PBOC cut LPR by the same 10 basis points.
PBOC announces LPR on the 20th of each month and in March it was left unchanged.
www.CentralBankNews.info
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