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China cuts rates via a new tool
The People's Bank of China cut the one-year loan prime rate (LPR) by five basis points to 4.2% while keeping the five-year LPR rate unchanged at 4.85%. The LPR is the new reference rate for banks and other financial assets, which can quote an interest rate linked to the LPR. The last time the PBoC cut the one-year LPR was on 20 August, from 4.31% to 4.25%. Here's how the interest rate works: the change in the LPR is an average of quotations from some banks; each rate change is a multiple of 5 bps; the LPR is linked to the medium lending facility (MLF) interest rate, i.e., LPR is +/- MLF; the MLF has not changed since ... (full story)