The PBOC kept its one-year loan prime rate at 3.35%, as expected, while the five-year LPR, which is used to determine mortgage prices, was maintained at 3.85%.
The central bank had unexpectedly trimmed both rates by about 10 basis points in July, with the move coming amid a slew of measures to help shore up local economic growth.
The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending rates in the country. The five-year rate is closely tied to China’s property market, which has been struggling with nearly four years of slowing sales and an extended cash crunch.
While Chinese consumer inflation picked up slightly in July, other metrics- specifically lending activity and industrial production- pointed to sustained economic weakness in the country.
July’s rate cut was the PBOC’s first such move in nearly a year. But the central bank has consistently kept policy loose to help foster an economic recovery in China, to limited effect.
Weakness in the economy is expected to give the PBOC more impetus to cut rates further in the coming months.
Source: Economy - investing.com
