China cuts key lending rate to prop up coronavirus-hit economy

SHANGHAI (REUTERS) – China cut its benchmark lending rate on Thursday (Feb 20), as widely expected, as the authorities move to lower financing costs for businesses and support an economy hit by a fast-spreading coronavirus epidemic.

The one-year loan prime rate (LPR) was lowered by 10 basis points to 4.05 per cent from 4.15 per cent at the previous monthly fixing.

The five-year LPR was lowered by 5 basis points to 4.75 per cent from 4.80 per cent.

All 51 respondents in a Reuters snap survey had expected a reduction in the LPR, with 38 respondents, or about 75 per cent of participants, tipping a 10 basis points cut to both tenors.

The LPR cut followed a similar move in the central bank’s medium-term lending rate on Monday as policymakers sought to ease the drag to businesses from the coronavirus outbreak.

The LPR is a lending reference rate set monthly by 18 banks. The People’s Bank of China revamped the mechanism to price LPR in August 2019, loosely pegging it to the medium-term lending facility rate.

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