PBOC 1&5 year loan prime rates left unchanged, as expected

China Leaves the five-year Loan Prime Rate unchanged at 4.65% (est 4.65%) and the one-year loan prime rate 3.85% vs 3.85% as expected.

Meanwhile, the actual room for further cuts was not as large as it seemed, analysts at ANZ bank argued.    

Their reasoning is that ”the People’s Bank of China (PBoC) has to maintain the hierarchy of different banks according to its “three tranches and two premiums” RRR framework, to encourage their compliance with the credit guidance. The “two premiums” refer to incentives which require a gap of 250bps.”    

There was no market reaction to the outcome. 

About the PBoC Interest Rate Decision

The PBoC Interest Rate Decision is announced by the People´s Bank of China. If the PBoC is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the CNY. Likewise, if the PBoC has a dovish view on the Chinese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

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