China’s central bank slows down rates on leasing facilities, but Reuters has seen low chances of lowering benchmarks

BEIJING (Reuters) – China’s central bank will cut its leasing facility rate by 25 points (bps) to help the rural sector and small businesses from December 7, the state Securities Times reported on Tuesday, citing sources.

But the benchmark lending rate remains low in the short term, analysts say.

The three-month income rate will fall to 1.7%, the six-month rate will fall to 1.9% and the one-year rate will drop to 2%.

A bank source confirmed the rate cut to Reuters.

“Today’s loans are based on the new interest rate. The rate cuts should be in line with the RRR cuts, and are measures to help the real economy,” the source told Reuters.

In July 2020, the central bank cut rebate and transfer rates by 25 points for small businesses and the rural sector.

Investors are looking closely to see if the central bank will reduce its benchmark lending rate or lending rate (LPR) in the coming months after it said it would reduce the ratio of bank reserve requirements from Monday 15 December.

The world’s second-largest economy is facing headwinds by 2022 as a result of declining real estate that has hampered consumption and sharp limits on COVID-19.

“We believe that Beijing will need to significantly step up its policy easing measures, including changing some real estate boundaries in the spring of 2022 to prevent a hard landing,” China’s chief economist Ting Lu Nomura said in a statement.

“We will see another 50 bp RRR reduction in H1 in 2022, but we still see a relatively low probability of a policy rate cut due to the rise in PPI inflation and CPI inflation.”