The People’s Bank of China is expected to cut its key reverse repo rate today, along with its key lending rates. The Fed’s rate cut this week is expected to pave the way for PBOC cuts.
The People’s Bank of China has turned to the 7-day repo rate as the main policy signal.
Reuters poll shows 27 out of 39 expect one- and five-year mortgage rates to be cut today
- 2- We only expect a five-year reduction.
- 10 Don’t expect any change.
currently:
- The base interest rate for a one-year loan is 3.35%.
- The five-year rate is 3.85%.
- The reverse repo rate is 1.7%.
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People’s Bank of China’s Lending Rate (LPR):
- It is the benchmark interest rate used in China, set by the People’s Bank of China every month.
- The LPR serves as a reference rate for banks when setting interest rates on (primarily new) loans issued to their customers.
- Most new and outstanding loans in China are based on the one-year mortgage interest rate, while the five-year mortgage interest rate affects mortgage pricing.
- It is calculated based on the interest rates submitted daily to the People’s Bank of China by a panel of 18 selected commercial banks in China.
- The committee consists of domestic and foreign banks, with different weights assigned to each bank’s contributions based on its size and importance in China’s financial system.
- The interest rate on loans is based on the average rates offered by these banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the average rate becomes the interest rate on loans.