China | The PBoC cut 5-year loan prime rate to support housing market and growth

The PBoC unexpectedly cut the 5-year loan prime rate by the largest amount today while maintaining the one-year loan prime rate which is deemed to be the policy rate unchanged.

Key points

• Key points:
• Cutting the 5-year LPR by 25 bps which is the main reference rate for housing mortgage and long-term loans indicates the determination of the Chinese authorities to support the housing market and stimulate growth recovery.
• Maintaining one-year LPR at 3.45% suggests the PBoC's concern of RMB exchange rate and capital outflows before the Fed materializes the rate cut
• US Fed interest rate cut which is anticipated to be after June 2024, together with China's deflationary environment provides policy room for further monetary expansion.
• We anticipate another 2-3 LPR cuts and 2 more RRR cuts in 2024 to support economic growth and reverse the market sentiments.

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