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Hong Kong(CNN Business)China on Friday slashed a key interest rate to rescue its slumping housing market and head off a major downturn in the world's second largest economy.
The People's Bank of China cut its five-year loan prime rate (LPR) by 15 basis points to 4.45%, the second reduction this year and the largest on record. Most analysts had expected a cut of five basis points.
China's LPR is the rate at which commercial banks lend to their best customers. It serves as the benchmark for other loans and the five-year maturity is typically used as a reference for mortgages.
The central bank's decision to slash the five-year rate is the latest in a series of steps that China has taken to tackle a real estate crisis as Covid lockdowns threaten to push the economy into its first quarterly contraction since early 2020.
Sales of new homes plunged 47% in April from a year earlier, according to the National Bureau of Statistics earlier this week, while prices in 70 cities dropped for an eighth consecutive month.
"[Friday's move] signals that the leadership has ... decided to rescue [the property sector] as soon as possible," said Zhaopeng Xing, senior China strategist for ANZ Research. "It also suggests that China is making great efforts to achieve its 5.5% growth target" for 2022,he said.
amp.cnn.com
The People's Bank of China cut its five-year loan prime rate (LPR) by 15 basis points to 4.45%, the second reduction this year and the largest on record. Most analysts had expected a cut of five basis points.
China's LPR is the rate at which commercial banks lend to their best customers. It serves as the benchmark for other loans and the five-year maturity is typically used as a reference for mortgages.
The central bank's decision to slash the five-year rate is the latest in a series of steps that China has taken to tackle a real estate crisis as Covid lockdowns threaten to push the economy into its first quarterly contraction since early 2020.
Sales of new homes plunged 47% in April from a year earlier, according to the National Bureau of Statistics earlier this week, while prices in 70 cities dropped for an eighth consecutive month.
"[Friday's move] signals that the leadership has ... decided to rescue [the property sector] as soon as possible," said Zhaopeng Xing, senior China strategist for ANZ Research. "It also suggests that China is making great efforts to achieve its 5.5% growth target" for 2022,he said.
China slashes key interest rate as housing sales collapse
China on Friday slashed a key interest rate to rescue its slumping housing market and head off a major downturn in the world's second largest economy.
amp.cnn.com
