China's central bank leaves loan prime rate unchanged for 16th straight month

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The People's Bank of China on the 20th left the loan prime rate, the benchmark for bank lending rates, unchanged for a 16th consecutive month, in line with market expectations. The one-year rate was kept at 3.00% and the five-year rate at 3.50%. With major central banks around the world recently taking a more hawkish stance, the hold on the LPR underscored the limited room for fresh monetary easing in China. A Reuters survey of 21 market participants found that all of them expected both rates to stay put. New and existing loans in China are mainly based on the one-year LPR, while the five-year LPR affects mortgage rates. The Federal Reserve raised its policy rate last week and signaled it could hike further in the coming months. Serena Zhou, senior China strategist at Mizuho Securities, said, "Unless domestic demand weakens significantly further, we believe broad monetary easing in the fourth quarter has become unlikely, especially against the backdrop of the Fed's increasingly hawkish stance."

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Article notes the Fed raised its policy rate last week and signaled further hikes, keeping the effective fed funds rate elevated/higher.

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