From CNBC: 2024-06-19 06:11:53

Fitch now predicts China will maintain its one-year medium-term lending facility (MLF) at 2.5% for 2024 and lower it to 2.25% in 2025 due to concerns over the U.S. Federal Reserve’s interest rates. The Fed decided to keep interest rates the same, which has strengthened the U.S. dollar against the Chinese yuan. This has put pressure on China’s capital outflows and raised concerns about bank net interest margins being too low.

The last time China cut the one-year MLF was in August 2023, according to official data. The People’s Bank of China uses the MLF to guide the benchmark loan prime rate. PBOC Governor Pan Gongsheng stated that monetary policy will remain supportive, with the yuan’s exchange rate staying stable despite complex circumstances. He also mentioned that the interest rate gap between China and the U.S. remains high, delaying a policy shift in major developed economies.

Read more: Fitch pushes back China rate cut as Fed holds interest rates steady