China cut its lending benchmarks on Tuesday in the first such easing in 10 months, as authorities seek to shore up a slowing recovery in the world's second-largest economy, with more stimulus expected.

The latest monetary easing comes as China's post-pandemic recovery shows signs of losing steam after some initial momentum in the first quarter of this year.

The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.55%, while the five-year LPR was cut by the same margin to 4.20% from 4.30%.

A Reuters poll of 32 market participants showed all respondents expected reductions to both rates.

The People's Bank of China (PBOC) lowered short- and medium-term policy rates last week, signalling it is about to embark on another round of loosening in monetary settings in a push to rev up the recovery.

The medium-term lending facility (MLF) rate serves as a guide to the LPR and markets mostly see the medium-term rate as a precursor to any changes to the lending benchmarks.

China's cabinet met on Friday to discuss measures to spur growth in the economy and pledged more policy support.

"Such marginal easing will probably help prevent growth from slowing sharply, but will unlikely offer a strong boost to reverse the growth slippage in the near future," they said, downgrading their forecasts for China's economic growth outlook for this year to 5.7% from 6.3% previously.

Several global investment banks cut their 2023 gross domestic product growth forecasts for China after May data showed the recovery was faltering.

The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks who submit proposed rates to the central bank every month.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China last cut both LPRs in August 2022 to boost the economy.

Source : Reuters