China is gearing up to cuts lending benchmarks at its monthly fixing on Monday, aiming to stimulate credit demand and provide a lifeline to the struggling property sector.
Analysts Predict LPR Cuts Following Medium-Term Policy Rate Decrease
Experts predict that both the one-year and five-year Loan Prime Rate (LPR) will be slashed, aligning with the central bank’s unexpect reduction in the medium-term policy rate. This move is anticipat to support the ailing property market, plagued by default risks and deflationary pressure.
The People’s Bank of China (PBOC) calculates the LPR each month based on proposals submitted by 18 designated commercial banks. Market watchers foresee a 15-basis-point decrease in the one-year LPR, with 54% in agreement. While 94% anticipate at least a 15 bp cut in the five-year rate, currently at 4.20%.
Analysts at Citi believe that a 10 bp cut in the one-year LPR. And a 20 bp cut in the five-year LPR will be implement to further stabilize the property sector. They also expect a potential 25 bp cut in banks’ reserve requirement ratio (RRR) soon.
In response to the deepening property crisis, the PBOC vowed to optimize property policies. It’s anticipat that the central bank will continue with additional RRR cuts and balance sheet expansion to mitigate risks in critical sectors.