The Central Bank of the People's Republic of China is responsible for formulating and implementing monetary policies, preventing and mitigating financial risks, and maintaining financial stability.
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China on Friday kept its key lending benchmark interest rates unchanged at the monthly level.
Market watchers polled by Reuters had expected a rate cut after the Federal Reserve's 50 basis point rate cut gave China more room to lower domestic borrowing costs without causing a sharp depreciation of the yuan.
The People's Bank of China said it would keep the one-year benchmark lending rate at 3.35% and the five-year benchmark lending rate at 3.85%.
The one-year lending rate affects corporate loans and most household loans in China, while the five-year lending rate serves as a benchmark for mortgage rates.
Lower interest rates in the United States have given China more monetary flexibility to focus on easing the debt burden on consumers and businesses as it seeks to boost investment and spending.
China surprised markets by cutting key short- and long-term lending rates in July, in a move to revive growth in its economy, which had been grappling with a protracted property crisis and weak consumer and business sentiment.
China’s retail sales, industrial production and urban investment grew at a slower-than-expected pace in August, missing economists’ forecasts in a Reuters poll. The urban unemployment rate rose to a six-month high, while year-on-year house prices fell at their fastest pace in nine years.
Disappointing economic data highlighted weak momentum in the economy, and renewed calls for the government to introduce more fiscal and monetary stimulus measures.
However, loosening monetary policy and cutting interest rates likely won't be enough to reverse China's economic slowdown, according to experts who spoke on CNBC's “Street Signs Asia” Friday morning.
“China’s problem is not a supply problem, it’s a demand problem,” said Brendan Ahern, chief investment officer at Crenshares, stressing the need for more fiscal support to boost consumer confidence and lift property prices.
“They can cut interest rates to zero, and that won’t necessarily speed up the recovery in their housing market,” said Peter Boockvar, chief investment officer at Bleakley Financial Group.
Both Ahern and Boockvar believe that Beijing will see a more beneficial economic recovery when housing prices stop falling.
Some major banks have cut their full-year GDP growth forecasts for China to below the government’s official target of 5%. Bank of America cut its 2024 GDP growth forecast to 4.8%, and Citigroup cut its forecast to 4.7%.
