Testing times for People's Bank of China 🇨🇳💰
FILE PHOTO: Government-organised media tour to Voith in ShanghaiSHANGHAI -China cut its benchmark lending rate and lowered the mortgage reference by a bigger margin on Monday, adding to last week's easing measures, as Beijing boosts efforts to revive an economy hobbled by a property crisis and a resurgence of COVID cases.
The one-year loan prime rate was lowered by 5 basis points to 3.65% at the central bank's monthly fixing on Monday, while the five-year LPR was slashed by 15 basis points to 4.30%. "We anticipate two more 10 bps cuts to the PBOC policy rates over the remainder of this year and continue to forecast a reserve requirement ratio cut next quarter."
But worries over widening policy divergence with other major economies dragged the Chinese yuan, to near two-year lows. The onshore yuan last traded at 6.8258 per dollar.In a Reuters poll conducted last week, 25 out of 30 respondents predicted a 10-basis-point reduction to the one-year LPR. All of those in the poll also projected a cut to the five-year tenor, including 90% of them forecasting a reduction larger than 10 bps.
Goldman Sachs lowered China's 2022 full-year GDP growth forecast to 3.0% from 3.3% previously, far below Beijing's target of around 5.5%. In a tacit acknowledgement of the challenge in meeting the GDP target, the government omitted a mention of it in a recent high profile policy meeting.
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