PBOC Signals Greater Latitude for Chinese Banks to Set Interest Rates

48

The Chinese central bank is on track to further liberalise domestic interest rates in 2019.

A work conference of the People’s Bank of China (PBOC) held on Friday signalled that it would loosen mechanisms for the setting of interest rates by Chinese banks according to a report from Caixin.

The move will give Chinese banks greater discretion to set rates based on market trends and their own business objectives, as opposed to cleaving to the benchmark rate announced by PBOC.

The benchmark rate in China has remained unchanged for more than three years, after it was reduced to 4.35% for one-year loans in October 2015, putting it almost three percentage points ahead of the one-year deposit rate.

PBOC’s caused a stir in December when it reduced the rate for its one-year medium-term lending facility – one of the Chinese central bank’s key open market operations instruments – by 0.15 percentage points to 3.15%.

Analysts speculate that the move portends an imminence cut in the benchmark rate as part of efforts by Beijing to bolster the economy amidst unabating Sino-US trade tensions.

LEAVE A REPLY

Please enter your comment!
Please enter your name here