SHANGHAI- China stepped up its monetary easing efforts to prop up a slowing economy this week by lowering a set of key policy rates and lending benchmarks, and markets believe Beijing could ease further before growth bottoms out.
With the property downturn seen persisting into 2022 and fast-spreading Omicron variant dampening consumer activity, many analysts expect more easing measures will be necessary, despite other major economies, including the United States, appearing set to tighten their monetary policies this year.
The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.70 percent from 3.80 percent. And the five-year LPR was reduced by 5 basis points to 4.60 percent from 4.65 percent, the first reduction since April 2020.
The LPR cuts were expected after official comments called for more monetary easing to prop up the broad economy.
All 43 participants in a snap Reuters poll predicted a cut to the one-year LPR for a second straight month. Among them, 40 respondents also forecast a reduction to the five-year LPR rate.
The cut to the 5-year LPR suggested that “the Chinese authorities are keen to lower the cost of credit lending, so the total credit growth is expected to rebound after the Spring Festival to ease the pressure on macro economy,” said Marco Sun, chief financial analyst at MUFG.
“China’s monetary policy still has some room for easing in the first half of this year, depending on the policy transmission effect and the growth target set by annual parliamentary meeting in March.” — Reuters
