BEIJING, (Reuters) – China’s central banks will reduce the rate on its relending facility by 25% to help the small and rural sectors. This change is effective Dec. 7.

Analysts say that there is little chance of the benchmark rate being reduced in the near future.

According to the newspaper, the three-month lending rate will drop to 1.7% and the six-month rate to 1.9%, respectively, while the one-year rate of 2% will apply.

According to a source in the banking industry, the rate reduction was confirmed by Reuters.

Today’s loans will be based upon the new interest rates. According to Reuters, the rate reduction should coincide with the RRR decrease. They are also measures that support the real economy.”

The central bank reduced the relending and re-discount rates for rural and small businesses by 25 basis points in July 2020.

After the announcement on Monday that it will reduce banks’ reserve requirements ratios starting Dec. 15, investors are keeping an eye out for any changes in the benchmark lending rate or the loan prime rate (LPR) by the central bank.

Headwinds for the second-largest country in the world are numerous as 2022 approaches. These include a slowing economy and tight COVID-19 regulations that have limited consumption.

Ting Lu (chief China economist at Nomura) stated in a note that Beijing might need to increase its policy easing efforts, which includes reducing property curbs for spring 2022 in order to avoid a hard landing.

We may also see another 50-bp RRR reduction in H1 2022. However, we still consider the probability of a rate cut to be very small due to rising CPI inflation and elevated PPI inflation.