The People’s Bank of China (PBOC) was built on Tuesday, April 18, 2023 in Beijing, China.
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China kept its benchmark loan interest rates stable on Monday as the country continued to struggle to cope with weak consumer sentiment and softening growth.
People’s Bank of China The 1-year loan quality interest rate is set at 3.0%, and the 5-year LPR is 3.5%.
LPR is usually charged to the bank’s best customers and is calculated based on a survey of designated commercial banks proposed by dozens of designated commercial banks to the central bank.
A 1-year LPR affects corporate and most household loans in China, while a 5-year LPR is the benchmark for mortgage interest rates.
The decision comes after the country announced a year-on-year increase of 5.2% in the second quarter, down from 5.4% in the first quarter. But that is higher than 5.1% expectations for the Reuters poll of economists.
Retail sales growth in June also fell to 4.8% from the same period last year. 6.4% year-on-year growth in May. The figure has not yet flushed economists’ 5.4% forecast from Reuters.
After this move, the maritime RMB remained flat, with a exchange rate of 7.179 against the US dollar.
“Demand Cliff”
Nomura analysts said in a July 9 note that despite current economic indicators, the economic base may “deteriorate significantly” in the second half of this year.
Analysts said demand could be much weaker in several ways, adding that asset prices could increase under pressure and market interest rates could ease further.
Therefore, they believe that Beijing “is likely to be anxious to take new support measures sometime in the second half of the year.”
Nomura said the country faces a “demand cliff” in the second half of the year due to export speeds, including U.S. tariffs and reduced sales in key real estate sectors.
“Among these negative drivers, the fiscal situation in most cities is likely to worsen further. We expect the GDP growth rate of H2 to drop from 5.1% in H1 to 4.0%.
