Interest rate cut from the Central Bank of China

The People's Bank of China (PBOC) reduced the 1- and 5-year reference basic interest rates (Loan Prime Rate) by 10 basis points to 3.55 percent and 4.20 percent, respectively.

However, this reduction was below Bloomberg survey forecasts.

The median expectation of economists surveyed was that interest rates would be reduced to 3.55 per cent and 4.15 per cent, respectively. The 5-year reference base interest rate is a reference for mortgage loans in the country. Some analysts were of the opinion that the 5-year reference basic interest rate could be further reduced due to problems in the housing sector.

Although Chinese banks reduced their loan interest rates after the PBOC's decision, some analysts considered the discount rate as disappointing.

Bruce Pang, Chief Economist of Jones Lang LaSalle China, said, "The fact that both 1 and 5-year interest rates were reduced at the same rate shows that policymakers want to avoid giving an overly optimistic signal about the property market within the framework of the 'housing is for living, not for speculation' principle."

Ken Cheung, Asia Currency Strategist at Mizuho Bank, also emphasised that the 10 basis point cut in the 5-year LPR was somewhat disappointing for those expecting a strong stimulus to revive the troubled housing sector.