China's central bank lowered its key lending benchmarks on Tuesday, cutting the 1-year Loan Prime Rate from 3.10% to 3.00% and the 5-year LPR from 3.60% to 3.50%. The People's Bank of China published the revised rates on its website, confirming the reductions as the latest step in the monetary easing package announced by the PBoC on 7 May.
The 1-year LPR, which underpins the pricing of most corporate and household loans in China, was reduced by 10 basis points, while the 5-year rate, the primary anchor for long-term mortgage lending, was trimmed by an equal margin. Both cuts came at the monthly LPR fixing, the mechanism through which Chinese banks adjust their reference rates in line with the PBoC's guidance.
Beijing had also stepped up fiscal support earlier in the year, including consumer trade-in subsidies.
CONTEXT
The cuts were the first LPR reductions since October 2024 and took both rates to record lows. The trade conflict with the United States escalated in April before a partial truce was agreed in Geneva on 12 May.
The LPR cuts followed measures announced by PBoC Governor Pan Gongsheng on 7 May, including a 10 basis point cut in the seven-day reverse repo rate to 1.40% and a 50 basis point cut in banks' reserve requirement ratio effective 15 May.