Latest news with #monetary easing
Reuters
2 days ago
- Business
- Reuters
China leaves benchmark lending rates unchanged, as expected
SHANGHAI, July 21 (Reuters) - China kept benchmark lending rates unchanged on Monday, as forecast, after it reported slightly better-than-expected second-quarter economic data. Signs of economic resilience effectively reduced any urgency for further stimulus, while analysts widely expect persistent weak domestic demand warrants some monetary easing later this year. The one-year loan prime rate (LPR) was kept at 3.0%, while the five-year LPR was unchanged at 3.5%. In a Reuters survey of 20 market participants conducted last week, all participants predicted no change to either of the two rates. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China's economy slowed less than expected in the second quarter in a show of resilience against U.S. tariffs, though analysts warn weak demand at home and rising global trade risks will ramp up pressure on Beijing to roll out more stimulus. Meanwhile, persistent deflationary pressure also calls for further monetary easing measures. China's producer deflation deepened to its worst in almost two years in June as the economy grappled with uncertainty over a global trade war and subdued demand at home. A lot of market attention will be shifted to the Politburo meeting later this month, which is likely to shape economic policy for the rest of the year. ** Tommy Xie, head of Asia macro research at OCBC: "China's GDP deflator has been in negative territory for nine consecutive quarters. "The weak nominal growth despite above target real growth may weigh down corporate profitability as well as income growth. "We expect PBOC to lower its benchmark interest rate by another 20 basis points this year although the room for more aggressive rate cuts may be limited given the bottleneck faced by the economy."
Yahoo
5 days ago
- Business
- Yahoo
China expected to keep lending rates steady, focus turns to Politburo meet
SHANGHAI (Reuters) -China is widely expected to leave its benchmark lending rates unchanged at a monthly fixing on Monday, a Reuters survey showed, as signs of economic resilience reduced the urgency for further monetary easing. The 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). In a Reuters survey of 20 market watchers conducted this week, all respondents expected both the one-year and five-year LPRs to remain steady. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. The consensus of no immediate monetary easing comes as data this week showed China's second-quarter gross domestic product (GDP) growth nudged slightly above market expectations, even though weak domestic demand and uncertainty around U.S. tariffs have raised economic risks. "Although continued downward price pressures and sluggish loan demand present a solid case for further easing, the PBOC may opt to hold off until a more opportune window," said Lynn Song, chief China economist for Greater China at ING. "We continue to expect one more 10-basis-point rate cut and 50-basis-point reserve requirement ratio (RRR) cut before year-end." For now, market attention would be squarely on the Politburo meeting later this month, which is likely to shape economic policy for the rest of the year, traders and analysts said. "With H1 real GDP growth still solid, we do not think policymakers see the immediate need to launch broad-based, significant stimulus in the near-term, including at the July Politburo meeting," analysts at Goldman Sachs said in a note. "Instead, we expect incremental, targeted easing to help stem the property downturn and mitigate labour market pressures in H2." China's new home prices declined at the fastest pace in eight months in June from the previous month, official data showed on Tuesday, underscoring the challenges policymakers face in reviving demand even after multiple rounds of support measures.
