China is expected to keep its benchmark lending rates unchanged for the fourth straight month on Monday, according to a Reuters survey. The move follows the central bank’s decision to hold a key policy rate steady, even after the U.S. Federal Reserve cut rates.
Recent data has shown signs of slowing momentum in the Chinese economy. Still, authorities appear reluctant to roll out large-scale stimulus measures, with resilient exports and a rallying stock market helping to stabilize sentiment.
The loan prime rate (LPR) is the main lending benchmark in China. It is calculated each month after 20 commercial banks submit proposed rates to the People’s Bank of China (PBOC). Most new and outstanding loans are tied to the one-year LPR, while the five-year rate is used for mortgage pricing.
All 20 economists surveyed by Reuters this week expect both the one-year LPR at 3.00% and the five-year LPR at 3.50% to remain unchanged. A trader noted that any adjustment to LPRs usually follows a cut in the central bank’s seven-day reverse repo rate, which stayed steady on Thursday.
China last trimmed both LPRs by 10 basis points in May. While weak July and August economic data raised calls for more support, analysts at Barclays said Beijing is likely to keep fiscal stimulus limited, especially if trade relations with Washington remain stable.
Even so, some economists expect modest monetary easing later this year to ensure China reaches its official growth target of around 5%. Larry Hu, chief China economist at Macquarie, said policymakers are likely to take incremental steps rather than major action. He expects a 10-basis-point rate cut before the end of the year.
