The PBoC  prime loan rate decisions: Cut by 5 basis points for 1 and 5 year rates

The PBoC  prime loan rate decisions which  are announced by  the People ´s Bank of China  arrived as follows:

• Cut by 5 basis points for both the for 1 and 5-year rates.  
• China Five-Year Loan Prime Rate 4.80% (prev 4.85%).
• China One-Year Loan Prime Rate 4.15% (prev 4.20%).

More to come …

In prior meetings and announcements, the Chinese authorities had been  repeatedly emphasizing  a  need to improve financing to the country’s privately run, smaller companies, which account for much of the economic growth.  The key points of the new “loan prime rate” were  to increase the role of market forces in determining rates. at the same time, there was a focus on lower financing costs to the real economy. However,  how effective these  rates will be in helping smaller businesses is yet to be seen considering how difficult it may be to  spur  demand for new loans.

About the PBoC Interest Rate Decision:

If the PBoC is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the CNY. Likewise, if the PBoC has a dovish view on the Chinese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.