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SHANGHAI (Reuters) – China left lending rates unchanged for a third straight month, as expected, as a weaker yuan slowed Beijing’s monetary policy efforts.
In the monthly revision on Monday, the one-year lending rate (LPR) was kept at 3.1%, while the five-year LPR was unchanged at 3.6%.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences mortgage rates.
In October 2024, Chinese lenders lowered lending rates by a larger than expected rate to revive economic activity.
WHY IT’S IMPORTANT
China’s economy beat the government’s target of 5% growth last year, effectively reducing the pace of monetary stimulus at a time when the yuan currency is facing renewed downward pressure.
‘Cutting the interest rate also reduces the room for cuts.
ADD THE NUMBERS
The one-year lending rate (LPR) was kept at 3.1%, while the five-year LPR remained unchanged at 3.6%.
EXPECTATION
China has stepped up measures ranging from monetary warnings, tweaks to cash flow and debt issuance to cushion the falling yuan.
Investors are betting on the latest rate cuts in China, the stock market shows, as expectations grow that authorities will resist easing policy as the yuan weakens.
The Politburo said earlier last month that China would adopt a “properly green” fiscal policy by 2025, the first easing in nearly 14 years, as well as a strong fiscal policy to promote economic growth. .
