SHANGHAI, Sept 20 (Reuters) - China cut its new one-year benchmark lending rate for the second month in a row on Friday, to 4.20%, as the central bank seeks to guide borrowing costs lower for an economy hit by the Sino-U.S. trade war.
The largely-expected reduction in the one-year Loan Prime Rate (LPR) came after the People’s Bank of China (PBOC) lowered banks’ reserve requirements on Monday. It also comes shortly after the Federal Reserve cut U.S. interest rates by 25 basis points (bps).
The one-year LPR dipped to 4.20% at its monthly fixing on Friday, 5 bps lower than 4.25% in August. However, the five-year LPR was unchanged at 4.85%.
Friday’s was the second reduction in the one-year LPR, a lending reference rate set by 18 banks that the PBOC revamped last month, loosely pegging it to the rate on its medium-term lending facility (MLF). The MLF rate at 3.3% was last cut in early 2016.
A lower LPR could translate to lower borrowing costs for companies and consumers in a slowing economy. (Reporting by Samuel Shen and John Ruwitch; Editing by Richard Borsuk)