The main Chinese rates remain unchanged, in the name of stability. The National Interbank Funding Center revealed that the one-year market-based primary loan rate (LPR) was set at 3.85%, unchanged from the previous month. The five-year plus LPR, on which many institutions base their top client loan rates, also remained unchanged at 4.65%. The Chinese central bank does not deviate from its prudent policy, even in the face of the move by the Fed which inexplicably closed ranks by strengthening the dollar. The yuan has fallen to a six-week low.
China displaced by the American restrictive turn
For the 14th consecutive month, China’s key rates remain unchanged. The one-year prime lending rate (Lpr), a market-based benchmark lending rate, remained at 3.85%, unchanged from the previous month. The over-five-year LPR is also stable at 4.65%, according to the National Interbank Funding Center.
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The Fed said on Friday that the US Central Bank’s shift towards more rapid monetary policy tightening was a “natural” response to economic growth and, in particular, inflation, which moves faster than expected as the Country tries to get out of the pandemic.
The turnaround from an expansionary policy will not be without consequences for Beijing, the effects on the currency and on the markets have already manifested.
Yuan at six-week lows
An aggressive Fed could lead to an even stronger dollar and a weaker yuan, putting pressure on the Chinese stock market and causing chain overseas outflows, this was a first assessment that insiders agreed on.