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China cuts new loan rate for second month

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SHANGHAI: China cut its new one-year benchmark lending rate for the second month in a row on Friday, a step by the central bank to try to wrestle down borrowing costs and support the economy as the Sino-US trade war drags on.


But the move was far more cautious than easing by the US Federal Reserve and the European Central Bank over the past week, suggesting Chinese policymakers remain reluctant to join a global stimulus wave due to worries about mounting debt.


Still, analysts say Beijing’s restraint is being put to the test, as worsening economic data in August has raised fears that third-quarter growth could slip below 6 per cent, breaching the lower end of the government’s 2019 target. Many China watchers believe more forceful measures will be needed soon to avoid a sharper slowdown and get the economy back on an even keel.


As widely expected, China’s new Loan Prime Rate (LPR) — for banks’ best customers — was cut 5 basis points (bps) at Friday’s monthly fixing to 4.2 per cent, the second time it has been trimmed since it was revamped in August, and days after the central bank’s latest reduction in banks’ reserve requirements (RRR) took effect.


Total reductions in the rate so far, at 11 bps, are less than half of the Fed’s quarter-point rate cut on Thursday, which some analysts say reflects policymakers’ concerns that lower rates could lead to property bubbles and add to financial risks. — Reuters


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