The Fed hints that it will reduce interest rates in the future, and China will keep its benchmark lending rate stable | Wilnesh News

China kept its main benchmark lending rate unchanged on Friday as Beijing faces the challenge of boosting economic growth while supporting a weakening yuan.

The People’s Bank of China said it would stabilize The quoted interest rate for one-year loans is 3.1%, and the quoted interest rate for five-year loans is 3.6%. The 1-year LPR affects corporate and most home loans, while the 5-year LPR serves as a reference for home loan interest rates. A Reuters poll of 27 economists showed the move was expected.

The interest rate decision comes amid widespread expectations that the Federal Reserve will cut interest rates by 25 basis points on Wednesday. The Federal Reserve also said it would cut interest rates only twice in 2025, fewer than the four rate cuts predicted at its September meeting.

Analysts said the Fed’s revised outlook for future interest rate cuts is unlikely to have a huge impact on the Chinese central bank’s easing policy trajectory, although it could put pressure on the yuan.

Earlier this month, senior Chinese officials pledged at a high-level economic agenda-setting meeting to step up monetary easing measures, including cutting interest rates, to boost the struggling economy.

The People’s Bank of China kept its one- and five-year LPR unchanged in November, following a widely expected 25 basis point cut in October. The central bank surprised markets in July by cutting key short- and long-term lending rates.

Wang Jing, chief economist at Nomura Securities, said in a report on Monday that “the space for traditional monetary policy is limited” due to concerns about squeeze on bank profit margins and pressure on the depreciation of the yuan.

Major investment banks and research firms forecast further depreciation of the yuan next year as President-elect Trump is expected to follow through on his tariff threats.

Despite a series of stimulus measures since the end of September, China’s latest economic data shows that the country is still dealing with entrenched deflation amid tepid consumer demand and a prolonged slump in the real estate market.

Wang Yan, chief emerging markets and China strategist at Alpine Macro, told CNBC’s “Street Signs Asia” on Thursday that the Fed’s future easing cycle will “create some space for the Chinese central bank to follow up,” while emphasizing that fiscal easing will play a greater role. .

He added that Beijing needs to use its balance sheet to boost domestic demand and stem the economic downturn.

—CNBC’s Dylan Butts contributed to this report.