China Lowers Lending Reference Rate as Part of Reforms - Forex News by FX Leaders
PBOC

China Lowers Lending Reference Rate as Part of Reforms

Posted Tuesday, August 20, 2019 by
Arslan Butt • 1 min read

PBOC announced a slight reduction in new lending reference rate as part of its latest round of reforms in a bid to boost corporate investments. On Tuesday, the Chinese central bank lowered its one-year Loan Prime Rate (LPR) from 4.31% to 4.25% and its five-year LPR at 4.85%.

Over the weekend, the PBOC had replaced the previously used benchmark one-year lending rate with the LPR to become the new lending benchmark for new loans being issued to businesses as well as households. This latest move could potentially help banks reduce their lending rates in a bid to boost economic activity.

With businesses in China reeling under the effects of the trade war and weakening domestic demand, PBOC hopes that the lowered rates would encourage business investment. Although the PBOC has not lowered its lending rates since 2015, markets are expecting it to possibly follow suit in case the US Federal Reserve cuts interest rates in its September meeting.

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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