China stands pat on benchmark rate, signals brief pause in easing efforts
20 May, 2020
China held its benchmark lending rate steady on Wednesday, though analysts believe the widely expected decision signals simply a brief pause in the central bank’s efforts to aid an economy ravaged by the coronavirus pandemic.
The one-year loan prime rate (LPR) remained at 3.85 percent from last month’s fixing, while the five-year LPR was also kept at 4.65 percent.
A Reuters survey of traders and analysts showed a lot more than 70 percent of these expected China would stand pat on the benchmark lending rate in-may.
Markets usually take the People’s Bank of China’s (PBOC) stance on its medium-term lending facility (MLF) rate - which serves as helpful information for the LPR - as an indicator for just about any adjustment to the lending benchmark.
The PBOC surprised markets last Friday by keeping the interest on MLF loans steady, even as authorities have stepped up the pace of monetary easing recently to combat the worst monetary slowdown in decades.
Jacqueline Rong, senior China economist at BNP Paribas in Beijing, said the steady LPR will not mean the PBOC won’t deliver additional rate cuts or reduce banks’ reserve requirement ratio (RRR) in June.
“Objectively speaking, financial recovery in April and could was much better than market forecasts, and was probably beyond policy expectations,” she said.
Gross domestic product (GDP) shrank 6.8 percent in the first quarter year-on-year, the worst quarterly contraction on record, as the pandemic and tough containment measures paralyzed activity in the united states.
China has lowered the LPR twice this year, while also delivering other easing measures to revive growth.
Some analysts expect more aggressive monetary and fiscal stimulus could possibly be rolled out soon to greatly help companies and consumers, possibly at China’s annual National People’s Congress (NPC) session starting on, may 22.
The LPR is a lending reference rate set monthly by 18 banks.
Source: www.thejakartapost.com
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