China had cut the benchmark lending rate on Thursday in a widely-anticipated action to lessen its business’ financing costs in an economy disrupted by the virus outbreak.
The one-year loan prime rate (LPR) was lowered by 10 basis points to 4.05% at the previous monthly fixing. Meanwhile, the five-year LPR was cut by 5 basis points to 4.75%.
Mayank Mishra, a macro strategist at Standard Chartered Bank in Singapore, expressed concern that while the LPR cut was expected, it may not be sufficient enough to soften the economic impact of the virus.
“The Chinese authorities are sending a message that easing will happen, but it will happen at a measured pace. They do not want to fuel expectations that they will be easing aggressively,” Mishra said.
“We expect more monetary easing in the form of 100 basis points in the required reserve ratio and 10 basis points in the medium-term lending facility in addition to what we’ve already seen.”