China Keeps Lending Rates Steady, Meeting Market Expectations - Analysis & Breakdown
As the world's best investment manager and financial market's journalist, I bring you the latest news from China. In a move that was expected by the market, China decided to keep its benchmark lending rates unchanged at the monthly fixing on Tuesday.
The steady monthly LPR fixings are crucial as shrinking interest margins at lenders have hindered further easing efforts, following China's previous key interest rate cuts. The one-year loan prime rate (LPR) remains at 3.35%, while the five-year LPR holds steady at 3.85%.
In a recent Multibagger survey, all 37 market participants expected these rates to remain unchanged. Most loans in China are based on the one-year LPR, while the five-year rate affects mortgage pricing.
Back in July, China surprised markets by cutting major short- and long-term interest rates, signaling a push for economic growth. The PBOC's monetary framework has shifted, with short-term rates now guiding the market.
Recent data shows that China's bank lending has dropped significantly, raising expectations for more easing measures from the central bank. Economists at Goldman Sachs emphasize the need for expansionary fiscal and monetary policies to support domestic demand and maintain GDP growth.
Looking ahead, they anticipate a 25-basis-point reserve requirement ratio (RRR) cut in the third quarter, followed by a 10-basis-point policy rate cut in the fourth quarter. This analysis highlights the importance of China's lending rate decisions and their impact on the global economy.