China’s central bank on Monday cut two key interest rates to all-time lows, the latest in a series of moves to revive its economy. The stated goal by Chinese officials is to achieve an five percent annual economic growth target.
The People’s Bank of China said it would reduce the one-year loan prime rate (LPR) to 3.1%, while the five-year LPR which serves as a benchmark for mortgage rates has been trimmed to 3.6%.
Recent announcements had triggered a rally in mainland and Hong Kong stocks in September, but further gains are unlikely until consumer spending and home buying start picking up. Uncertainty about the real estate market have worried Chinese investors for the past several years.
The hope is that even with more spending, flat oil prices will help to mitigate the risk of inflation. China is the world’s top importer of crude oil.
In the United States, the Federal Reserve had recently cut the federal funds rate by 50 basis points to a range of 4.75% to 5%, the first reduction in four years.
