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KEY TAKEAWAYS
- China on Monday cut its benchmark lending rate, in a move aimed at boosting an economy that continues to suffer a sharp slowdown from a prolonged real estate slump, tepid consumer spending, and trade tensions.
- The People’s Bank of China cut a short-term policy rate, and banks followed by cutting the benchmark lending rate for mortgages and the one-year loan prime rate by 10 basis points.
- The cuts come after last week’s twice-a-decade government meeting to discuss reforms failed to result in big stimulus measures to boost the economy.
China cut its benchmark lending rate Monday, in a move aimed at boosting an economy that continues to suffer a sharp slowdown from a prolonged real estate slump, tepid consumer spending, and trade tensions.
The People’s Bank of China cut a short-term policy rate, and Chinese banks followed by cutting their benchmark lending rate for mortgages, the five-year loan prime rate, by 10 basis points, as well the rate for most other loans—the one-year loan prime rate—by the same amount. The cuts came as a surprise, according to Bloomberg.
Rate Cuts Follow Underwhelming Meeting Last Week
The cuts come after last week’s twice-a-decade meeting to discuss reforms by President Xi Jinping and the Communist Party’s top officials failed to result in big stimulus measures to boost the economy. China’s gross domestic product (GDP) rose a weaker-than-forecast 4.7% year-over-year in the second quarter.
Still, analysts cited by The Wall Street Journal said the cuts in interest rates Monday were too small, and the problems of the property sector—including oversupply of real estate—too big for the cuts to make a difference to the economy.