China’s Surprise Move on Loan Rates Shows Banks Under Pressure
- Mortgage reference rate stays unchanged, 1-year loan rate cut
- Lower lending rates would hurt profitability at banks
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Chinese banks kept a key interest rate that guides mortgages on hold and made a smaller-than-expected cut to another rate, surprise moves that reflect Beijing’s difficult choice between boosting confidence and safeguarding the banking system’s stability.
The five-year loan prime rate was left at 4.2% on Monday, according to data from the People’s Bank of China. Most economists had predicted the rate to be cut by 15 basis points following a similar reduction last week to an key central bank policy loan rate. That was seen as precursor for a cut to the 5-year LPR.