China keeps lending benchmark LPR steady, as expected
SHANGHAI - China kept its lending benchmark rate unchanged on Friday, but markets widely expect further monetary easing in 2020 to arrest an economic slowdown in the world’s second-largest economy.
China’s economic growth slowed to near 30-year lows in the third quarter and speculation is mounting that Beijing needs to roll out stimulus more quickly and more aggressively. Governor of the People’s Bank of China Yi Gang said earlier this month the authorities should maintain “normal” monetary policy as long as possible since economic growth is still within a reasonable range and inflation is mild overall.
MLF, one of the PBOC’s main tools in flexibly managing longer-term liquidity in the banking system, now serves as a guide for the new LPR.The government has pledged to lower borrowing costs for smaller businesses to support the real economy, but Serena Zhou, economist at Mizuho Securities in Hong Kong argued that cutting LPR may not be a “panacea” for China.
But she still believes the central bank will continue to adopt a relatively accommodative monetary policy stance next year, and looks for reserve requirement ratio cuts of 100 basis points and MLF cuts of 10 basis points.
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