The People’s Bank of China cuts the refinancing facility rate, but the benchmark interest rate is less likely to be lowered Reuters

© Reuters. File picture: People wearing masks walk through the headquarters of the People’s Bank of China (PBOC) on April 4, 2020. REUTERS/Tingshu Wang/File Photo

BEIJING (Reuters)-According to a source quoted by the State Securities Times on Tuesday, the People’s Bank of China will cut the interest rate of the refinancing facility by 25 basis points (bps) from December 7 to support the rural sector and small businesses.

But analysts said that the possibility of lowering benchmark lending rates in the short term is still very low.

According to reports, the three-month refinancing interest rate will be reduced to 1.7%, the six-month interest rate will be reduced to 1.9%, and the one-year interest rate will be reduced to 2%.

A banking source confirmed to Reuters the rate cut.

“Today’s loans are based on new interest rates. Interest rate cuts should be consistent with RRR cuts, and they are measures to support the real economy,” the source told Reuters.

In July 2020, the central bank lowered the rediscount and refinancing rates for small businesses and the rural sector by 25 basis points.

After saying on Monday that the bank deposit reserve ratio will be lowered from December 15th, investors are paying close attention to whether the central bank will lower the benchmark lending rate or the prime lending rate (LPR) in the next few months.

Due to the real estate downturn and strict COVID-19 restrictions that hinder consumption, the world’s second largest economy faces multiple headwinds in 2022.

Lu Ting, chief China economist at Nomura Securities, said in a report: “We believe that Beijing may have to substantially strengthen its policy easing measures, including the cancellation of some real estate control measures in the spring of 2022 to prevent a hard landing.”

“We may lower the deposit reserve ratio again by 50 basis points in the first half of 2022, but due to rising PPI inflation and rising CPI inflation, the possibility of a rate cut is still very small.”

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