MNI BRIEF: China May LPR Down 10bp

China's Loan Prime Rate was reduced by 10bp on Tuesday, in line with expectations following the People’s Bank of China’s recent cut to the 7-day reverse repo rate. 

According to a PBOC statement, the LPR was cut to 3% for the one-year maturity and 3.5% for the five-year and over rate. Both were previously lowered in October by 25 basis points – the largest cuts since the LPR pricing mechanism reform in 2019. The central bank lowered the 7-day reverse repo rate – its benchmark policy rate – 10bp to 1.4% on May 8, followed by a 50bp reduction to the reserve requirement ratio on May 15. (See MNI PBOC WATCH: LPR To Fall 10bp On Lower Key Rate)

The long-awaited easing reflects the PBOC’s cautious balancing act between addressing domestic credit weakness and navigating rising external uncertainties. An advisor told MNI policymakers must retain flexibility to respond to fallout from the U.S. tariffs, while advancing innovation-driven growth and upgrading China's industrial structure.