The deposit interest rate and LPR were lowered on the same day, experts said, which is conducive to hedging the slowdown in external demand and stabilizing economic operation

On May 20th, after remaining unchanged for 6 consecutive months, the LPR quotation was lowered in May, which was in line with market expectations. Wang Qing, chief macro analyst at Oriental Jincheng, pointed out that the fundamental reason for the reduction of LPR quotation on May 20th was the sudden escalation of the Sino-US tariff war in April and the sharp change in the external environment. This means that the current macro policy needs to increase counter-cyclical adjustment efforts to hedge against the slowdown in external demand by expanding domestic demand and stabilize the economic operation. Lowering the policy interest rate and guiding the LPR downward will drive down the loan interest rates of enterprises and residents more significantly and reduce the financing costs of the real economy. This is an important force for expanding investment and promoting consumption at this stage. It also helps to alleviate the current high real loan interest rates of enterprises and residents after factoring in price factors, and stimulate the endogenous financing needs of enterprises and residents.