In an effort to balance relaxing monetary policy with preventing additional declines in the already-weak yuan, the People’s Bank of China (PBoC) held interest rates steady on Tuesday. The bank held the five-year rate. Which affects mortgage rates, at 4.30%, while maintaining its one-year loan prime rate. Which determines the interest rates the largest banks in the nation charge their customers, at 3.65%. The action follows a surprise drop in lending rates by the central bank in August. Which was made in an effort to support the economy after being severely hampered by lockdowns due to COVID this year.
However, the action hurt the yuan. Which fell this month below the crucial 7 level against the dollar. Given the size of its international commerce, further yuan depreciation might have a significant impact on the Chinese economy. Following the verdict, the yuan dropped 0.1% to 7.0125. Over 10% of the currency’s value has been lost so far this year. Now, the PBoC must maintain a delicate balancing act between easing policy to promote economic growth and ensuring there is no more yuan depreciation.
As a result, the PBoC recently fixed the daily yuan midpoints at unusually optimistic levels. Yet the action had no effect on yuan losses. In order to support growth, the bank reduced a repo rate and injected additional liquidity to the economy on Monday.
The yuan is also under pressure from a widening gap between domestic and international lending rates, as central banks around the world raise interest rates rapidly to counteract inflationary pressures. This week,. The U.S. Expected to Federal Reserve is expected to raise interest rates again. The nation’s interest rates are currently the highest they have been since the financial crisis of 2008. Anticipated that central banks in Europe and Asia will increase interest rates. SHREEMETALPRICES