China's central bank reduces LPR

China's one-year loan prime rate (LPR), a market-based benchmark lending rate, was lowered to 3.0 percent on Tuesday, down by 10 basis points, in the central bank's first cut of the rate this year.

The over-five-year LPR, on which many lenders base their housing mortgage rates, dropped to 3.5 percent from the previous reading of 3.6 percent, according to the National Interbank Funding Center.

The cut will further drive down financial costs for companies and Chinese residents, helping bolster market confidence and support the steady growth of the real economy, according to Xinhua News Agency.

On May 7, the People's Bank of China (PBC), the central bank, announced a series of rate cuts,including a reduction in the seven-day reverse repo rate and the interest rates for the standing lending facility, to better implement the moderately loose monetary policy and enhance support for the real economy.

Central bank governor Pan Gongsheng said the policy rate reduction is expected to lead the LPR, a market-based benchmark lending rate, down by 0.1 percentage points.

"The cut in LPR, the first round this year, has shown that the comprehensive financial support policies have led to further easing of monetary and credit policies, which in turn has reduced the borrowing costs of medium- and long-term funds," Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Tuesday.

"The policy to further reduce interest rate will help lower mortgage loans costs, which also should stimulate the housing consumption demand," Yan said.

On Tuesday morning, China's major state-owned commercial banks and some joint-stock banks announced reductions in deposit interest rates on Tuesday.

The one-year fixed-term deposit interest rate was cut by 15 basis points to 0.95 percent, according to the official deposit interest rates released by Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of Communications.

China Merchants Bank, a joint-stock bank based in Shenzhen, South China's Guangdong Province, also cut its deposit interest rate, with one-year fixed-term deposit interest rate being reduced to 0.95 percent.

With the banks' announcements on Tuesday, the one-year fixed-term deposit interest rate was below 0.95 percent, according to the Securities Times.

The latest round of deposit interest rate reduction for state-owned banks followed two rounds of cuts in 2024, according to media reports.