The People’s Bank of China slashed its key lending rates for corporate and household loans for a second straight month at its January fixing as policymakers sought to cushion a slowdown in economic recovery due to multiple headwinds, including sporadic COVID-19 cases and soaring cost of raw materials; while lowering a mortgage reference rate for the first time in nearly two years.

The 1-year loan prime rate (LPR) was cut by 10 bps to 3.7% from 3.8% and the 5-year LPR was trimmed 5 bps to 4.60% from 4.65% which was the first reduction since April 2020. The central bank’s Vice Governor Liu Guoqiang said Tuesday that policymakers should move ahead of the market curve, and respond to the general concerns of the market in a timely manner.

The statement followed an unexpected cut to borrowing costs for medium-term loans earlier this week as Chinese economic data in December showed a further weakening in consumption amid a downturn in the property sector.