China keeps lending benchmarks unchanged; economic weakness tests policymakers

china-keeps-lending-benchmarks-unchanged;-economic-weakness-tests-policymakers
China keeps lending benchmarks unchanged; economic weakness tests policymakers

China has decided to keep its lending benchmarks unchanged, despite the need for more stimulus due to signs of a faltering economic recovery. The second quarter saw slow growth in China’s economy, leading investors to hope for additional supportive measures to meet Beijing’s growth target for the year. However, market watchers believe that any stimulus provided may be targeted and limited in scale to avoid widening interest rate differentials with the United States and further pressuring the weak yuan.

The one-year loan prime rate (LPR) remains at 3.55%, while the five-year LPR stays unchanged at 4.20%. A recent poll of 26 market watchers revealed that all participants predicted no changes to either of these rates. The People’s Bank of China (PBOC) has maintained the interest rate unchanged earlier this week and rolled over maturing medium-term policy loans. The steady LPR fixings are in line with the PBOC’s use of the medium-term lending facility (MLF) rate as a guide to the LPR, which is often seen as a precursor to any adjustments to the lending benchmarks.

Last week, China’s central bank announced its intention to utilize policy tools such as the reserve requirement ratio (RRR) and MLF to address the challenges faced by the country’s economy. The LPR, which is typically charged by banks to their top clients, is determined by 18 designated commercial banks that submit proposed rates to the central bank on a monthly basis. The one-year LPR is the basis for most new and outstanding loans in China, while the five-year rate influences mortgage pricing. In June, China reduced both LPRs in an effort to stimulate the economy.

In conclusion, China has chosen to maintain its lending benchmarks despite the need for additional stimulus. The decision to keep the rates unchanged is in line with the central bank’s use of the MLF rate as a guide to the LPR. Market watchers anticipate that any stimulus provided will be targeted and limited in scale to avoid further pressure on the weak yuan and widening interest rate differentials with the United States.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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