China keeps benchmark loan interest rates unchanged

China has kept its benchmark lending rates steady, as expected, as new signs of economic stability and a weakening yuan have reduced the need for urgent monetary easing. Chinese banks left their one- and five-year reference prime rates unchanged, in line with the median expectation in a Bloomberg survey. The one-year reference prime rate was left at 3.45% and the five-year reference prime rate at 4.20%. The decision signaled caution in not putting downward pressure on the yuan ahead of the Fed’s interest rate meeting. The benchmark prime rate generally moves in line with the People’s Bank of China’s interest rate indicator. The PBOC also left its rate unchanged last week. However, this pattern was broken in August when the PBOC cut rates by 15 basis points and banks by 10. Bloomberg Economics also expected Chinese banks to close the gap with a 5 basis point cut today, despite the PBOC’s decision to skip the call last week. Zou Lan, PBOC’s director of monetary policy, said the bank had “wide policy space” to respond to challenges. “The central bank will accelerate countercyclical adjustments,” Zou told reporters this morning. “We see more easing and stimulus measures in the coming month. We are not ruling out a rate cut, but we think fiscal easing will have a greater impact than a rate cut,” Wee Khoon Chong, senior market strategist at Bank of New York Mellon, said.