China is widely expected to trim its main policy and benchmark lending rates on Friday, a Reuters poll showed, after the Federal Reserve’s 50 bps interest rate cut.
China’s loan prime rate (LPR), normally charged to banks’ best clients, is calculated each month after 20 designated commercial banks submit proposed rates to the People’s Bank of China (PBOC).
As reported, monetary policy consideration and weakening Chinese yuan have been the key constraints limiting Beijing’s efforts to loosen policy over the past few years.
But with the U.S. central bank kicking off its monetary easing cycle with a larger-than-usual half-percentage-point reduction this week, analysts and traders believe Beijing has more justification to trim rates.
In a Reuters survey of 39 market watchers conducted this week, 27, or 69%, of all respondents expected both the one-year and five-year LPRs to be trimmed. Among the remaining 12 respondents, two forecast a reduction only to the five-year LPR, while the other 10 predicted no change to either rate.
China surprised markets by cutting major short- and long-term interest rates in July, its first such broad move in almost a year, signaling policymakers’ intent to strengthen economic growth.
Slowing Chinese economic activity has prompted global brokerages to scale back their 2024 China growth forecasts to below the government’s official target of about 5%.
