China has cut a benchmark lending rate but defied market expectations by leaving another unchanged as policymakers grapple with their response to slowing economic momentum, a property sector cash crunch and a weakening currency.

The one-year loan prime rate (LPR), a reference for bank lending in China, was lowered 10 basis points to 3.45 per cent, the People’s Bank of China announced on Monday. The equivalent five-year rate, which is closely watched because of its relationship to mortgage lending, was kept steady at 4.2 per cent.

Economists polled by Bloomberg had unanimously projected 15bp cuts to both the one-year and five-year rates. The outcome was “quite surprising and frankly it’s a bit puzzling,” said Hui Shan, chief China economist at Goldman Sachs.