China maintains LPR steady amid signs of economic stability

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China’s one-year and over-five-year loan prime rates (LPR) remained unchanged in September 2023 at 3.45 per cent and 4.2 per cent, respectively, as per the National Interbank Funding Center. This decision by the People’s Bank of China comes as fresh signs of economic stability have emerged, negating the immediate need for a rate cut to stimulate growth.

In August, China had lowered its one-year LPR by 10 basis points, surprising markets by keeping the five-year rate unchanged. Both rates serve as benchmarks for new and outstanding loans, including mortgages. Most market analysts and traders had predicted the rates to remain steady, following the central bank’s recent actions. Last week, the bank decided to roll over maturing medium-term policy loans and maintained their interest rate, setting the stage for the current LPR fixings, according to several media reports.

In September 2023, China’s one-year and over-five-year LPR stayed at 3.45 per cent and 4.2 per cent.
The People’s Bank of China’s decision aligns with signals of economic stability, reducing the urgency for immediate rate cuts.
This follows an August reduction in the one-year LPR by 10 basis points, while the five-year rate remained unchanged.

The decision to keep the LPRs unchanged is in line with broader monetary policy, which has seen the central bank reduce the amount of cash that banks must hold as reserves, thereby boosting liquidity.

The Chinese yuan has been under pressure, losing more than 5 per cent against the dollar this year. Economic data such as retail sales and industrial production have shown encouraging signs, exceeding expectations.

Overall, China’s cautious yet optimistic approach suggests a more stable economic trajectory, although the magnitude and pace of future policy easing remain uncertain. Experts predict that the low base effect will ensure China’s growth exceeds 5 per cent in the upcoming fourth quarter, keeping the door open for possible LPR reductions next month.

Fibre2Fashion News Desk (NB)


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