The Strategist

China's central bank lowers LPR rate for the first time since August 2022

06/20/2023 - 11:01

The primary LPR rate of China's central bank was reduced to 3.55 percent for the first time since August 2022.

The People's Bank of China (Central Bank) cut the prime lending rate (LPR, loan prime rate) to 3.55 percent for the first time since August 2022, according to information on the regulator's website.

The annual LPR, which started serving as the new standard for lending in August 2019, remained constant from April 2020 through December 2021, staying at 3.85%. However it was reduced to 3.8% in December 2021, 3.7% in January 2022, 3.65% in August, and then remained constant after that.

The annual LPR was 3.55%, according to data released by the Central Bank of China on Tuesday. The five-year LPR rate, which many lenders use as the benchmark for their mortgage rates, dropped from its previous level of 4.3% to 4.2%.

Late in August 2019, the People's Bank of China made a significant announcement regarding interest rates that would cut borrowing costs for businesses and boost the economy. The regulator modified the benchmark rate for bank loans as part of the reform. Instead of the People's Bank of China's benchmark bank lending rate, banks must now use the LPR as a benchmark to determine variable lending rates.