China keeps MLF rate unchanged ahead of LPR decision
The People's Bank of China (PBOC) kept the rate of its medium-term lending facility (MLF) at 2.5% on Sunday.
In a statement, the PBOC said it sought to "maintain banking system liquidity reasonably ample", particularly after the week-long Lunar New Year holiday. On Tuesday, China loan prime rates are expected to also remain unchanged. The one-year loan prime rate, used for corporate and household loans, should stay at 3.45% for a fifth straight month, while the five-year rate, the reference for mortgages, is likely to remain at 4.2% for the seventh month in a row, as IGTV’s Angela Barnes explains.
(AI Video Summary)
The People's Bank of China
The People's Bank of China has decided to keep the interest rate of its medium-term lending facility at 2.5%. This is to ensure there is enough money in the banking system after the Lunar New Year holiday. This decision has caused the exchange rate between the US dollar and the Chinese yuan to go down. Many people believe that the US Federal Reserve will also lower their interest rate in March, which is putting pressure on the US dollar. However, the head of the Federal Reserve has said that it is unlikely they will lower the interest rate in March. In the next week, people will be watching closely to see how the US dollar reacts to the release of the US Minutes, which is a report that shows the discussions of the Federal Reserve.
Chinese loan prime rates
In China, the loan prime rates are expected to stay the same. The one-year loan prime rate, which affects loans for companies and households, will keep at 3.45% for the fifth month in a row. The five-year rate, which affects mortgages, will also stay at 4.2% for the seventh month in a row. This means that companies, families, and people with mortgages in China will not see any changes in the interest rates they have to pay.
The US Federal Reserve
Overall, the People's Bank of China's choice to keep liquidity in the banking system and the possibility of the US Federal Reserve lowering interest rates have influenced the exchange rate between the US dollar and the Chinese yuan. However, it doesn't seem very likely that the US interest rate will be lowered in March, as the head of the Federal Reserve has stated. In China, the interest rates for loans and mortgages are expected to stay the same for the foreseeable future.
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