Banque Populaire de China (PBOC) has set up a Fintech committee.
Zhang Peng | Lightrocket | Getty images
China could reduce its main policy rate next month after the country’s annual parliamentary assembly, CNBC economists told the country’s central bank after chose to maintain the stable loan loan rate THURSDAY.
Banque Populaire de China held the LPR at 1 year at 3.1% and the LPR at 5 years at 3.6%. The decision was in accordance with Reuters survey estimates.
LPR – Normally billed to the best banks customers – are calculated monthly on the basis of the proposed prices of the designated commercial banks subject to the PBOC. One -year LPR influences business loans and most household loans in China, while the five -year LPR serves as a reference for mortgage rates.
“Pressure on clear margins of interest and the exchange rate of banks in the middle of the slower rate of rate reductions in the federal reserve lead all to stabilization of the Chinese policy rate,” said Bruce Pang, Associate Professor Deputy to the business school of the Chinese University of Hong Kong.
Pang expects a drop in 50 basis points in the reserve needs ratio next month and provides that the opposite repo rate of 7 days – the country’s main rate of policy – is lowered from 40 to 50 points basic this year.
The pboc has been in recent months sought to defend the yuan while faced downward pressure In the midst of threats of higher prices, complicating his task to stimulate a faulty economy.
“We always think [the 7-day rate] has a decent chance of reducing in the first quarter, “said Lynn Song, chief economist at ING, because the real interest rate remains relatively high. It expects the PBOC to reduces rates after the annual parliamentary meeting in Beijing next month.
“Reduction rates could help encourage investment and consumption,” said Song, adding that the pressure on Yuan had disappeared recently, asserting a drop in rates.
China is expected to disclose its target of annual growth in 2025 at its parliamentary meeting chaired by Xi Jinping, which will be held from March 4 to 5.
Political decision -makers are likely to maintain the objective of actual real growth unchanged to “around 5%” while reducing the objective of inflation of consumers to “approximately 2%” of “approximately 3%” last year, according to Goldman Sachs.
The Wall Street bank expects reiterating decision-makers to repeat their promises of pro-commune monetary promises during the meeting while committing to stabilizing the Yuan in a “reasonable range”.
Supporting the Yuan, however, is accompanied by risks for the economy, because a lower yuan could help maintain Chinese exports at a competitive price abroad, while a stronger currency makes more expensive imports to A time when consumer demand was low.
Governor of Pboc Pan Gongsheng said at a conference in Saudi Arabia on Sunday That a stable yuan was essential to maintain global financial and economic stability. Pan also reiterated Beijing’s commitment to adopt a proactive budgetary policy and an accommodating monetary policy this year.
The Yuan offshore Chinese decreased by almost 2.5% against the greenback since Donald Trump’s electoral victory in November, after recovering some of the losses in recent weeks. It strengthened 0.20% Thursday to negotiate itself to 7,2673 on the dollar.
Spurring Growth VS Stabilizing Yuan
The second world economy is struggling to emerge from an prolonged real estate crisis and a lukewarm consumption demand.
While PBOC officials said at the end of last year, they would reduce the reserve ratio of banks And interest rates for “appropriate time”, rate reductions have not yet materialized, because political decision-makers are faced with more trade tensions with the United States
Since the inauguration last month, US President Donald Trump imposed a tariff of 10% on all imports From China, in addition to the existing rates of up to 25%.
However, the market concerns concerning trade tensions are touched, following reports that Trump could conclude a large agreement with China, a team of analysts from DBS Bank said on Thursday.
“Hopes increased from a complete American-Chinese agreement can limit any deterioration in RMB feeling in the future, even if the markets are waiting for other Trump prices,” said the bank.
The steps of relaxation of the forced PBOC was the slower rhythm of the Fed with decreases in policy rate. Managers of the American Federal Reserve have agreed that they should see inflation decrease more before reducing interest rates, according to the Minutes of their January meeting, published Wednesday.
Unlike the focus put by the Fed on the rate of federal reference funds, The PBOC uses a rate combination to manage monetary policy. The governor said he would like the 7 -day reversed repo rate to act as the main policy rate.
China has maintained its stable 7 -day rate to 1.5% from a reduction in SeptemberWhen Beijing has unveiled a wider set of stimulus aimed at reducing growth.
