The People's Bank of China announced on Tuesday that it maintained the one-year Loan Prime Rate (LPR) unchanged and cut the five-year LPR by 25 basis points (bps) from 4.20% to 3.95%.
Rate-setters in China took decisive steps to bolster its property market on Tuesday, by implementing the first cut in its benchmark five-year loan prime rate since June.
Beijing is striking a delicate balancing act to support the economy at a time when signs of persistent deflationary pressure call for more stimulus measures. But any aggressive monetary movement risks reviving depreciation pressure on the Chinese currency and capital outflows.
A 0.5 percentage-point cut to the ratio, the amount of cash that banks have to keep in reserve, will provide 1 trillion yuan ($139 billion) in long-term liquidity to the market, Pan said during a briefing with the press Wednesday.