PBOC Loan Prime Rates (LPR) CUT: 1-year 3.45% (prior 3.55%) & 5 year 4.2% (prior 4.20%)

<p>A cut to the one-year rate of 10bp vs. 15 that was widely expected. </p><p>And no cut to the 5 year rate at all. Thats a shock. </p><p>—</p><p>Background to this is here:</p><ul><li><a href="https://www.forexlive.com/centralbank/economic-calendar-in-asia-peoples-bank-of-china-rate-decision-due-20230820/" target="_self">Economic calendar in Asia – People's Bank of China rate decision due</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/forecast-for-two-15bp-rate-cuts-to-come-from-the-peoples-bank-of-china-on-monday-20230818/" target="_blank" data-article-link="true">Forecast for two 15bp rate cuts to come from the People's Bank of China on Monday</a></li></ul><ul><li>G<a href="https://www.forexlive.com/centralbank/goldman-sachs-expect-15bp-rate-cuts-from-the-peoples-bank-of-china-today-20230820/" target="_self">oldman Sachs expect 15bp rate cuts from the People's Bank of China today</a></li></ul><p>—</p><p>PBOC's Loan Prime Rate (LPR)</p><ul><li>It is an interest rate benchmark used in China, set by the People's Bank of China each month. While set on the 20th (the 21st this month given the 20th fell on a Sunday) the new LPR takes effect on the first day of the following month.</li><li>The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.</li><li>Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.<ul><li>The panel consists of both domestic and foreign banks, with different weights assigned to each bank's contributions based on their size and importance in the Chinese financial system.</li><li>The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce <a href="https://www.forexlive.com/terms/v/volatility/" target="_blank">volatility</a> and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.</li></ul></li></ul><p>Pan Gongsheng, People's Bank of China Governor</p>

This article was written by Eamonn Sheridan at www.forexlive.com.