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China Holds Benchmark Lending Rates: PBOC Maintains August Rates After July Cut

China Holds Benchmark Lending

China’s central bank, the People’s Bank of China (PBOC), has decided to keep its benchmark lending rates unchanged for August. The one-year loan prime rate (LPR) remains at 3.35%, while the five-year LPR stays at 3.85%, according to an official statement released on Tuesday. This decision comes after the PBOC reduced both rates by 10 basis points in July, marking a strategic move to stimulate economic growth amid challenging conditions.

The central bank’s decision to maintain the rates in August indicates a cautious approach as it assesses the impact of recent monetary policy adjustments. The July rate cuts were intended to provide relief to borrowers and support economic activity, especially in sectors that have been struggling with reduced demand and financial pressures. By keeping rates steady this month, the PBOC appears to be allowing time for the previous rate reductions to filter through the economy before making further adjustments.

In addition to these rate decisions, the PBOC has recently implemented significant reforms to its interest rate regime. One of the key changes includes shifting the reference for the loan prime rate from the medium-term lending facility (MLF) to the shorter-term seven-day reverse repurchase agreements. This adjustment is part of the central bank’s broader efforts to make the LPR more responsive to short-term market conditions and to enhance the effectiveness of monetary policy in guiding economic activity.

The unchanged rates in August suggest that the PBOC is closely monitoring the economy’s response to these reforms and recent rate cuts. As the Chinese economy continues to navigate through global uncertainties and domestic challenges, the central bank’s measured approach reflects its commitment to maintaining financial stability while supporting growth. The PBOC’s future policy actions will likely depend on ongoing assessments of economic data and the effectiveness of current measures in achieving their intended outcomes.

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