China keeps prime lending rates unchanged for the third straight month


By Ambar Warrick– The People’s Bank of China (PBoC) on Monday held its prime lending rates unchanged for a third straight month as the central bank struggles to strike a balance between supporting economic growth and curbing inflation. further depreciation of the yuan.

The PBoC kept its one-year LPR, which determines interest rates on short-term loans, unchanged at 3.65%, while the five-year LPR, which usually plays a role in mortgage rates, was kept at 4.30%.

The LPR is used by banks to determine the interest they charge their customers and is calculated each month based on proposals submitted to the PBoC by 18 designated commercial banks.

The bank had lowered both LPRs earlier this year in an effort to boost liquidity and support the severely slowing economic growth.

A cut in the one-year LPR was designed to increase short-term liquidity, while five-year rates were cut to help support China’s struggling real estate sector, which has also played a role in the country’s severe economic downturn this year.

But this dented the , pushing it to the lows last seen during the 2008 financial crisis. It reached a record low in September.

The yuan fell 0.5% on Monday, while its foreign counterpart fell 0.6%. The currency was also under pressure from uncertainty over US rate hikes, which have also been a major source of pressure this year.

China is dealing with its worst COVID-19 outbreak in seven months, which is expected to take another heavy toll on the world’s second-largest economy as it implements more lockdowns to contain the spread of the virus.

Rising infections and the measures to fight them have tarnished recent optimism that the country will scale back its strict zero-COVID policy, which has been at the heart of its marked economic slowdown this year.

While the country has rolled out a slew of stimulus measures to support economic growth, these have yet to reflect some improvement in the economy. Beijing recently introduced spending and debt relief measures to help support the beleaguered real estate sector.

But economic indicators released earlier this month showed that the world’s second-largest economy is struggling to navigate COVID-related disruptions. and both contracted significantly in October and are likely to be reflected in weaker Q4 GDP readings.

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