China maintained its key lending rates, balancing the need to stimulate economic growth with the challenge of supporting a depreciating yuan.
China kept its main benchmark lending rates unchanged on Friday, as Beijing faces the challenge of bolstering economic growth while backstopping a weakening yuan. The one-year loan prime rate remained at 3.1%, with the five-year LPR at 3.6%. The 1-year LPR affects corporate and most household loans, while the 5-year LPR serves as a reference for mortgage rates. The move was expected according to a Reuters poll of 27 economists.
The Fed also indicated it will only reduce interest rates twice in 2025, fewer than the four cuts in its September meeting's projection. The Fed's revised outlook on future rate cuts is unlikely to have a huge influence on the trajectory of policy easing by China's central bank, although it could put pressure on the Chinese yuan. There is limited space for conventional monetary policies due to concerns over squeezing bank profit margins and depreciation pressures on the yuan, Jing Wang, chief economist at Nomura said in a note on Monday. Despite a flurry of stimulus measures since late September, latest economic data out of China showed the country is still contending with entrenched deflation, amid tepid consumer demand and a protracted property market slump. The Fed's easing cycle going forward will create some room for the PBOC to follow up, Yan Wang, chief emerging markets and China strategist at Alpine Macro told CNBC's on Thursday, while stressing that fiscal easing will play a more critical role in driving the Chinese economy next year
CHINA ECONOMY INTEREST RATES YUAN FED
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