China central bank cuts benchmark lending rate to boost economy

The most recent reductions to the one-year rate came in August, while the five-year LPR had a reduction in June. Both rates are at record lows, closely tracked by markets. The goals of Tuesday's actions are to increase the availability of loans from commercial banks at more favorable rates.

In an effort to revive slowing development and counteract rate hikes in other big economies, China's central bank lowered a crucial benchmark lending rate utilized to price mortgages on Tuesday.

According to the announcement made by the People's Bank of China, the prime rate for five-year loans was reduced from 4.2 to 3.95. A key indicator for business loans, the one-year LPR stayed put at 3.45%.

The most recent reductions to the one-year rate came in August, while the five-year LPR had a reduction in June.

The goals of Tuesday's actions are to increase the availability of loans from commercial banks at more favorable rates.

The majority of other major economies are also increasing rates in an effort to control inflation, thus their policies stand in sharp contrast.

Indicators for the world's second-largest economy have been inconsistent, leading to this decision.

Hopes for a quick economic recovery following the end of harsh COVID restrictions in late 2022 were dashed when China suffered one of its weakest yearly growth rates since 1990 last year.

For months, officials have battled a variety of obstacles—a protracted property-sector crisis, rising youth unemployment, and a worldwide recession that has hit demand for Chinese goods—in their efforts to restart economic growth.

The government is under increasing pressure to take bolder action to rescue the country's ailing economy after consumer prices fell at their fastest rate in over 14 years in January.

Deflation has the potential to slow business profitability, which in turn hurts demand and employment over the long run.

Just last month, Beijing made an announcement about lowering the reserve requirement ratio (RRR), which is the amount of money that banks are required to keep on hand.