Stronger yuan among reasons for lowering rates

Stronger yuan among reasons for lowering rates

The Global Times is out with a report saying China's monetary policy may 'switch gears' in the coming months and join in the global easing trend.

China's monetary policy may switch gears in the coming months with the recent interest rate cut of its medium-term lending facility (MLF) signaling a lower loan prime rate (LPR). A Stronger yuan against the US dollar also provides more policy maneuvers for the Chinese monetary authority to follow suit in the new trend of global monetary easing.

They highlight that the rate to watch is the LPR and starting on Dec 31, national banks and financial institutions will have to peg at least 50% of loans to the LPR, rising to 80% in March 2020.

China's current situation means its central bank can afford lower interest rates. If there is a new wave in the global economic downturn, China is better prepared and has more countermeasures in the bag than other countries like the US.