China is getting ready to make an announcement on Monday, October 21, 2024. The People’s Bank of China (PBoC) plans to set the loan prime rates (LPRs) on that day. Last month, the PBoC made some rate cuts, including the 7-day reverse repo rate and the Medium-term Lending Facility (MLF) rate.
The PBoC has already cut the 1-year Medium-term Lending Facility (MLF) rate to 2% from 2.3%. It is expected that there will be a corresponding cut to the LPRs tomorrow. Governor Pan of the PBoC hinted at this rate cut on Friday, suggesting a reduction of 20 to 25 basis points. The current LPRs stand at 3.35% for the 1-year rate, which most new loans are tied to, and 3.85% for the 5-year rate, which serves as a reference for mortgages.
Looking ahead, China will also be releasing the latest Medium-term Lending Facility (MLF) rates later in the week. Given the rate cut that took place last month, no changes are expected for this facility. Additionally, the National People’s Congress of China is set to take place towards the end of October. It is anticipated that further stimulus measures will be introduced during this event.
The decision to cut rates is likely aimed at providing a boost to the Chinese economy, especially in light of global economic uncertainties. By reducing borrowing costs, the PBoC hopes to encourage more spending and investment, which could help stimulate economic growth. This move may also help address concerns about the impact of trade tensions and other external factors on China’s economy.
Overall, the upcoming rate cut announcement and potential stimulus measures indicate that Chinese authorities are actively working to support economic stability and growth. It will be important to monitor how these developments unfold and their impact on both domestic and global markets in the coming days.
