China leaves unchanged reference loan rates as expected, despite the drop in the Fed rate

China maintained its unchanged reference loan rates for the fourth consecutive month on Monday despite the drop in interest rates in the American federal reserve last week.

Banque Populaire de China kept the one -year loan rate unchanged at 3.0% while the five -year rate remained at 3.5%, according to a press release. The one year’s rate influences most of the new and suspended loans, while the reference over five years affects mortgages.

The central bank reduced key loan rates for the last time by 10 base points in May as part of Beijing’s efforts to strengthen its economy.

Last Thursday, the PBOC maintained the reversed repo rate of seven days, which serves as a main rate of policy, unchanged, after the 25 base of the Fed base.

Reference loan rates – normally billed to the best customers of banks – are calculated monthly depending on the proposed prices of the designated commercial banks subject to the PBOC.

The decision on Monday was in line with the expectations of economists according to which the Chinese authorities would retain the main recovery measures in a recent appeal, even as a chain of economic data, underlined the signs of fatigue in the economy.

The CSI 300 reference index opened its doors on Monday before dropping by 0.24%. The Yuan Offshore has strengthened slightly at 7,1161 compared to the US dollar.

China’s economic slowdown deteriorated in August with a series of key indicators lacking expectations. Retail sales slowed down to 3.4% in August, consumption remained low, while growth in industrial production spent 5.2%, marking its lowest level since August of last year.

In another sign of slow domestic demand, China consumer prices dropped more than expected last month, while wholesale prices have persisted for almost three years.

The country’s export growth slowed down 4.4% in August, marking their lowest growth rate since February, while the impact of fronts download shipping has decreased and the American trade policy targeting transhipment weighed on exports to third countries.

Economists expect Chinese decision -makers to deploy a marginal monetary softening later this year to ensure that the second world economy reaches the government’s annual growth objective of around 5%.

“Beijing’s objective has gone from risk management to growth in growth, moving from toleration of deflation to reflection on the economy,” said Hong Hao, Director Partner and CIO at Lotus Asset Management.

“China has reached a point where it must prevent the accumulation of ineffective assets and fueled by debt and start reducing unproductive investments,” said Hao, expecting a new political revival in the coming months.