Militia police officers stand guard in front of the People’s Bank headquarters in Beijing, China, on September 30, 2022.Reuters/Tingshu Wang/File photo Obtaining license rights
SHANGHAI/SINGAPORE, Sept 20 (Reuters) – China kept its benchmark lending rate unchanged at a monthly fixed rate on Wednesday, as expected, as new signs of economic stabilization and a weaker yuan reduced the need for immediate monetary easing. Ta.
Recent economic data shows the world’s second-largest economy is gaining footing after a sharp slowdown, while a weakening yuan prompts authorities to aggressively cut interest rates to support growth The urgency is decreasing.
The one-year loan prime rate (LPR) remained unchanged at 3.45%, while the five-year loan prime rate (LPR) remained unchanged at 4.20%.
While most new and outstanding loans in China are based on a one-year LPR, five-year interest rates influence mortgage pricing.
A Reuters survey of 29 market analysts and traders found that all participants expected the one-year LPR to remain unchanged, but a majority expected the five-year rate to remain unchanged.
The decision to stabilize the LPR follows the central bank’s decision last week to roll over maturing medium-term policy loans and leave interest rates unchanged on these loans.
The Medium Term Lending Facility (MLF) rate serves as an indicator of LPR and is seen by the market as a precursor to changes in lending benchmarks.
The Chinese yuan has depreciated more than 5% against the dollar this year due to widening yield disparities with other major economies, especially the United States, and weak domestic growth, prompting authorities to take steps to curb the decline in the yuan’s value. is being strengthened.
People’s Bank of China official Zou Lan said at a press conference on Wednesday that more attention should be paid to the renminbi’s exchange rate against a basket of currencies.
Zou said China will curb market turmoil, correct unilateral yuan movements and guard against the risk of currency overshoot.
“Monetary policy developments remain at a steady pace, and there is still a possibility of an LPR cut next month,” said Xin Zhaopeng, senior China strategist at ANZ.
“Net interest margins are not an impediment to rate cuts as banks are lowering deposit rates.”
Singh added that economic indicators will continue to improve in the fourth quarter and growth is certain to exceed 5% due to low base effects.
“The impact of policy will be felt for several quarters to come. We have revised our 2023 and 2024 gross domestic product (GDP) forecasts to up to 5.1% and 4.2%, respectively,” he said.
Last week, the People’s Bank of China cut for the second time this year the amount of cash banks must hold in reserves to increase liquidity and support economic recovery.
Despite the strength in the LPR, some market participants believe that recent real estate easing measures suggest a pullback in the five-year LPR, with further policy stimulus likely in the coming months. Said it was expensive.
“In the coming months, we expect real estate sales volumes to gradually stabilize at a low level, and infrastructure investment to remain strong at a high base but at a slower pace,” said Wang Tao, chief China economist at UBS.
“We maintain our full-year 2023 real GDP growth forecast at 4.8%. The development of the real estate recession and the scale and pace of policy easing remain the biggest uncertainties for the future growth trajectory.”
China lowered its benchmark one-year lending rate in August, but left the five-year rate unchanged, surprising the market.
Reporting by Winni Zhou, Tom Westbrook and Liangping Gao.Editing: Sam Holmes
Our standards: Thomson Reuters Trust Principles.