China maintains stable reference loan rates amid increasing tariff risk

China maintained its Key loan rates without changes on Thursdaysince Beijing prioritizes financial stability over the interest rate that decreases to reinforce the economy.

The Popular Bank of China maintained the preferential rate of 1 year loans without changes in 3.1%, and the LPR to 5 years in 3.6%. The decision was in line with Reuters survey estimates.

Reference loan rates – Normally charged the best Banks clients – They are calculated monthly depending on the rates proposed by the designated commercial banks presented to the PBOC. The one -year LPR influences corporate loans and most domestic loans in China, while the five -year -old LPR serves as a reference point for mortgage rates.

“The pressure on the net margins of banks and the exchange rate in the middle of a slower pace of the federal reserve features lead to a stabilization of China’s policy rate,” said Bruce Pang, Deputy Associate Professor of the Business School of the Chinese University of Hong Kong.

While Pboc officials said at the end of last year, they would reduce the reservation requirements of banks And interest rates in an “appropriate moment”, rates cuts have still materialized, since political leaders face more commercial tensions with the United States

“We still think that (the 7 -day rate) has a decent opportunity to be cut in the first quarter,” said Lynn Song, an Ing chief economist, since the real interest rate remains relatively high.

“Cutting rates even more could help foster investment and consumption in the margins,”

Supporting Yuan entails some risks to the economy, since a weaker yuan could help keep Chinese exports at a competitive price abroad, while a stronger currency makes imports more expensive at a time when the Consumer demand has been weak.

However, the governor of Pboc Pan Gongsheng He said at a conference in Saudi Arabia on Sunday that a stable yuan has been fundamental to maintain global financial and economic stability. Pan also reiterated Beijing’s commitment to adopt a proactive fiscal policy and a monetary policy accommodated this year.

Yuan on the high Mar Chinese has fallen 2.5% against Greenback since Donald Trump’s electoral victory in November.

In recent months, the PBOC has tried to defend the Yuan, since it faces a descending pressure in the midst of higher rates threats, which complicates its task of stimulating a hesitant economy.

Since the inauguration last month, the president of the United States, Donald Trump, has imposed a 10% tariff on all imports from China, in addition to existing rates of up to 25%.

Concerns about Trump’s tariff actions and subsequent inflationary pressure have slowed the Rhythm of the Fed with the policy rate cuts, according to the minutes of their January meeting.

Unlike the Fed approach at the reference federal funds rate, The PBOC uses a combination of rates to administer monetary policy. The governor has indicated that he would like the 7 -day inverse rate to act as the main policy rate.

China has maintained its 7 -day rate is stable with 1.5% from a cut in SeptemberWhen Beijing released a broader stimulus package intended to stimulate growth.