People's Bank of China Cuts LPR Rates and Reverse Repo Rate to Bolster Economy

The People's Bank of China eased monetary conditions on 22 July 2024, cutting its one-year loan prime rate to 3.35% and its five-year loan prime rate to 3.85%, whilst simultaneously reducing the seven-day reverse repo rate to 1.70%. The moves were aimed at supporting economic activity across the world's second-largest economy.

The five-year LPR serves as the reference rate for the majority of Chinese residential mortgages.

REVERSE REPO RATE

The reduction in the seven-day reverse repo rate to 1.70% acts on the short end of the money market curve, signalling the cost of short-term central bank liquidity and influencing interbank lending rates.

PBOC STATEMENT

The PBoC said the reverse repo cut was intended to strengthen counter-cyclical adjustment and better support the real economy.