China cut its mortgage benchmark rate by an unexpectedly wide margin on Friday, its second reduction this year as Beijing seeks to revive the housing sector to support the economy.
Officials have pledged new measures to combat the slowdown in the world’s second-largest economy, hit by Covid-19 outbreaks that have prompted strict measures and restrictions on mobility, and caused massive disruptions to activity.
Many market participants believe that Friday’s move was also a response to Chinese Premier Li Keqiang’s call to decisively accelerate adjustments and let the economy quickly return to normal.
“Today’s reduction in the five-year lending prime rate (LPR) should help spur a renaissance in home sales, which have gone from bad to worse recently,” Julian Evans-Pritchard of Capital Economics said in a note.
“But the lack of any one-year LPR reduction suggests that the central bank is trying to keep easing targeted and that we should not expect large-scale stimulus of the kind we saw in 2020.”
China, in a monthly fix, lowered the five-year lending primary rate (LPR) by 15 basis points to 4.45%, the biggest reduction since China renewed its interest rate mechanism in 2019 and more than than the five or 10 points given by the majority in a Reuters poll.
One-year LPR was unchanged at 3.70%.
Many private sector economists expect China’s economy to shrink this quarter from a year earlier, compared with 4.8% growth in the first quarter.
Recent indicators have shown that strict Covid-related measures and mobility restrictions have had a big impact.
Source: CNN Brasil
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