Last Friday, December 20, the People’s Bank of China decided to keep its main benchmark lending rates at the same level, as the Asian country is currently facing the challenge of bolstering economic growth while backstopping the weakening yuan.
The mentioned financial regulator kept the one-year loan prime rate at 3.1%. The five-year LPR remained at 3.6%. It is worth noting that the one-year LPR is an impact factor on corporate loans and most household loans. At the same time, the five-year LPR is a reference for mortgage loans.
It is worth noting that experts interviewed by the media predicted that the central bank of the Asian country would not make decisions on any changes in interest rates.
The Chinese financial regulator kept borrowing costs unchanged after in the United States this week the Federal Reserve cut interest rates by 25 basis points. The US financial regulator also expects that next year it will reduce the mentioned indicator twice. At the same time, in September, the central bank of the United States predicted four relevant decisions in 2025.
Analysts interviewed by reporters also said that the Fed’s outlook on the future lowering of borrowing costs, released this week, is unlikely to be a factor in impacting the monetary policy easing process of the People’s Bank of China, but it may put pressure on the yuan.
It is worth mentioning that in November, the Asian country’s financial regulator also kept interest rates unchanged after October’s 25 basis point cut. At the same time, in July, the People’s Bank of China surprised the markets by deciding to lower short-term and long-term lending rates.
It is also worth noting that the world’s largest investment banks and research companies are currently forecasting a further weakening of the yuan next year. The corresponding expectations are related to the confidence that Donald Trump, who won the United States presidential election last month and will return to the White House in January, will implement his intentions to increase tariffs on goods imported from other countries, including China. For Beijing, the materialization of the corresponding scenario will have painful consequences. Currently, in fact, the main driving force behind the upward dynamic of the Chinese economy, which is the second largest in the world, is export activity. Obviously, in the context of rising tariffs from Washington, the financial performance of the relevant activity will weaken significantly. Besides, it is worth noting that after winning the election, Donald Trump confirmed his intention to implement the specified plans.
