China's central bank is studying the potential impact on banks' loan p...
SHANGHAI/BEIJING - China’s central bank is studying the potential impact on banks’ loan pricing as it looks to the use of market-based interest rates to replace traditional benchmark interest rates to steer monetary policy, two sources told Reuters.
The PBOC has pledged to gradually unify two interest rate “tracks” - its market-based rates that have been developed in recent years and its benchmark bank deposit and lending rates. The sources did not give a timeframe. The PBOC did not immediately respond to Reuters’ request for comment. Other sources had told Reuters previously that the PBOC is not ready to cut benchmark rates just yet to spur flagging growth, but is likely to cut market-based rates, alongside further reductions in banks’ reserve requirement ratios .
An across-the-board cut in borrowing costs could also risk another flareup in debt and speculative activity like that which followed huge stimulus programmes in the past.But it has cut reserve requirements five times in the past year to spur lending to smaller businesses, with more expected in coming quarters, and it has been guiding money market rates lower to reduce financing costs.
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