PBOC Loan Prime Rates (LPR) CUT: 1-year 3.55% (prior 3.65%) & 5 year 4.20% (prior 4.30%)

People's Bank of China Loan Prime Rate policy rate setting for June 2023. The first cut to LPRs for 10 months.

1-year cut by 10bp to 3.55%

• prior 3.65%

& 5 year also getting a 10bp cut, to 4.20%

• prior 4.30%

So, that's it for China rate cuts for now. Over to the fiscal folks for more stimulus. Markets were disappointed yesterday that the State Council meeting over the weekend didn't result in any boosts for the economy being announced. Not yet anyway.

Last week the People's Bank of China cut 3 policy rates:

• PBOC 1 year MLF rate cut to 2.65% (prior 2.75%), as widely expected
• ICYMI - People's Bank of China rate cut overnight (that's two rate cuts in one day)

And there was other stimulus, with more expected:

• China cut the retail prices of gasoline and diesel from Wednesday, the 6th cut this year

• China reportedly considering broad stimulus package to bolster economic support
• China has been holding 'urgent' meeting with business leaders on boosting growth

• China’s State Council considering various macroeconomic policies to boost demand

Analysts are wary, though, that stimulus will be too little:

• More from Goldman Sachs - reasons for slashing their China growth forecast

• ICYMI - Nomura slashes its forecast for China's 2023 GDP growth to 5.1% from 5.5%
• UBS revised down its China 2023 GDP growth forecast to 5.2%, from 5.7% previously

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PBOC's Loan Prime Rate (LPR)

• It is an interest rate benchmark used in China, set by the People's Bank of China each month. While set on the 20th the new LPR takes effect on the first day of the following month.
• The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
• Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The panel consists of both domestic and foreign banks, with different weights assigned to each bank's contributions based on their size and importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.