SHANGHAI (Reuters) – China on Tuesday cut two benchmark interest rates for the first time in a decade, in a bid to provide further support to its economy.
The recovery of the world’s second largest economy is showing signs of slowing down, after a first quarter supported by the lifting of health restrictions.
The People’s Bank of China (PBOC) set its one-year prime lending rate at 3.55% from 3.65% and the five-year rate, which serves as a benchmark for mortgages, was also cut by ten. basis points, now at 4.20%.
A Reuters survey indicated that all analysts polled were expecting rate cuts. The five-year rate cut was less than expected, however, with half of the experts expecting a 15 basis point cut.
“These cuts should provide modest support for economic activity. But we believe this is unlikely to result in a sharp acceleration in credit growth, given weak demand,” said Julian Evans-Pritchard at Capital. Economics.
Xing Zhaopeng, chief strategist at ANZ, said the smaller-than-expected cut in the five-year rate suggests authorities are reluctant to use the property market as a source of near-term stimulus.
“The policy always prioritizes the new economy and will only ensure a soft landing of the old economy rather than new momentum,” he added.
The BPC lowered its short- and medium-term key rates last week.
(Winni Zhou and Tom Westbrook, graphics Kripa Jayaram; Laetitia Volga, edited by)
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