Offering too much of stimulus could add to inflation pressures and risk capital flight as the Federal Reserve and other economies raise interest rates aggressively.
The one-year LPR was last reduced in January. The five-year tenor, which was last lowered in May, influences the pricing of home mortgages. The LPR cuts come after the PBOC surprised markets last week by lowering the medium term lending facility rate and another short-term liquidity tool. Beijing's strict 'zero-Covid' strategy remains a drag on consumption and over recent weeks cases have rebounded again.
Goldman Sachs lowered China's 2022 full-year GDP growth forecast to 3% from 3.3% previously, far below Beijing's target of around 5.5%. In a tacit acknowledgement of the challenge in meeting the GDP target, the government omitted a mention of it in a recent high profile policy meeting.