Key facts
- China held its benchmark lending rates unchanged for the 16th consecutive month in September.
China's benchmark lending rates remained unchanged for the 16th consecutive month in September, aligning with market expectations. The decision underscores limited scope for further monetary easing by the People's Bank of China amid a strengthening yuan and a more hawkish stance from global central banks, particularly the US Federal Reserve.
China's decision to hold benchmark lending rates steady indicates a cautious approach to monetary policy, balancing domestic economic needs with global financial conditions and a strengthening yuan. This steady stance suggests limited immediate support for credit-sensitive sectors like property and local government financing, while also highlighting the divergence in monetary policy paths compared
China maintained its benchmark lending rates for the 16th month in a row in September, a decision that aligns with market expectations and signals limited room for further monetary easing. This comes as global central banks, including the US Federal Reserve, adopt a more hawkish stance. The Federal Reserve recently raised interest rates and indicated potential for more hikes, contributing to the yuan's continued strengthening.
China's slower loan growth is becoming a persistent trend, with shrinking property and local government sectors reducing credit demand more rapidly than emerging industries can compensate, according to Pan Gongsheng, Governor of the People's Bank of China.
Serena Zhou, senior China strategist at Mizuho Securities, noted that unless domestic demand weakens significantly more, the likelihood of broad-based monetary easing in the fourth quarter has decreased, especially given the US Federal Reserve's hawkish posture. Jacqueline Rong, chief China economist at BNP Paribas, believes China is in the latter stages of its rate-cutting cycle and expects the People's Bank of China to hold rates steady for the remainder of the year. This stance is constrained by tight net interest margins for banks and a shift from deflation to mild inflation, though a cut remains a risk if economic growth falters.