Key facts
- China is expected to keep its benchmark lending rates unchanged in September.
- The one-year loan prime rate (LPR) is predicted to remain at 3.00%.
- The five-year LPR is predicted to remain at 3.50%.
- All 21 market participants surveyed by Reuters predicted steady LPR settings.
- PBOC Governor Pan Gongsheng noted slower loan growth is the new normal.
China is widely expected to maintain its benchmark lending rates for a 16th consecutive month in September, as policymakers are hesitant to introduce further stimulus measures while major global central banks adopt a hawkish monetary policy stance. A Reuters survey of 21 market participants indicated that all respondents anticipate the one-year and five-year loan prime rates (LPRs) will remain unchanged at 3.00% and 3.50% respectively during the upcoming review on Sunday.
This consensus for steady rates comes as some major economies are tightening monetary policy to combat inflation. Citi analysts noted that the People's Bank of China (PBOC) might hold LPRs steady due to the hawkish shift among global central banks. The yield premium on benchmark 10-year U.S. Treasuries over Chinese government bonds has neared record highs following recent Federal Reserve rate hikes, even as the yuan has gradually appreciated against the dollar.
PBOC Governor Pan Gongsheng's recent comments supported the expectation of stable rates, suggesting that slower loan growth is becoming the norm. He indicated that shrinking property and local government sectors are reducing credit demand more rapidly than emerging industries can compensate. Although China's new bank loans saw a return to positive territory in August, the figures were significantly below analysts' expectations, following a record contraction in July, with weak demand from households and corporations continuing to impact credit growth.