China Cuts Two Benchmark Interest Rates for First Time in 10 Months

The People’s Bank of China (PBOC) lowered two benchmark interest rates on Tuesday for the first time in ten months, following a series of similar moves last week as the country struggles to recover from the consequences of a pandemic.

The prime interest rates for both one-year and five-year loans were reduced by 10 basis points. The one-year LPR (used to price mortgages) was lowered from 3.65% to 3.55%, while the five-year LPR (used to price business loans) was cut from 4.3% to 4.2%.

As recent data suggested the economy was still struggling, the central bank reduced two additional key rates last Thursday and injected billions into financial markets.

Following the announcement, the offshore yuan fell 0.13% against the U.S. dollar, trading at 7.172.

In contrast to China’s efforts to combat the post-Covid growth slowdown, the United States and other Western countries have been compelled to implement a series of interest rate hikes and reduce money supply in order to contain inflation.