China cut its benchmark reference rate for mortgages by an unexpectedly wide margin on Friday, its second reduction this year as Beijing seeks to revive the ailing housing sector to prop up the economy.
Senior officials have pledged further measures to fight a slowdown in the world's second-biggest economy, hit by COVID-19 outbreaks that prompted stringent measures and mobility restrictions and causing huge disruptions to activity.
China, in a monthly fixing, lowered the five-year loan prime rate by 15 basis points to 4.45%, the biggest reduction since China revamped the interest rate mechanism in 2019 and more than the five or 10 basis points tipped by most in a Reuters poll. The one-year LPR was unchanged at 3.70%., rose roughly 1% in early trading on the rate cut on Friday. The move failed to excite mainland-listed property shares, which were flat, although Hong Kong-listed developers inched up slightly.
"Policymakers might have reached a consensus on whether to revive the property sector," said Xing Zhaopeng, senior China strategist at ANZ, predicting further easing measures.The central bank has pledged to step up support for the slowing economy, but analysts say the room to ease policy could be limited by worries about capital outflows, as the Federal Reserve raises interest rates.
Friday's cut suggests that "China's economic growth was facing increasing resistance this year," said Marco Sun, chief financial market analyst at MUFG Bank.
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