PBOC: Interest rate level is appropriate

Bloomberg

China’s central bank governor said the country’s current interest rates are at an appropriate level and the bank will make decisions on interest rates based domestic considerations.
China didn’t follow the Federal Reserve in raising interest rates last year, and it’ll continue to “look at its own real situation” when making rate decisions now that the Fed is likely to cut, People’s Bank of China (PBOC) Governor Yi Gang said. “Lowering interest rates is mainly to tackle deflationary risks, but China’s inflation is moderate at the moment,” with consumer price gains at 2.7 percent, he said.
“Therefore the current interest rates level are appropriate, or close to a ‘golden’ level, a comfortable level.”
Yi’s comments signalled policy makers remain satisfied with the targeted approach of stimulus for now even with the economy slowing. Rather than a straightforward cut to the benchmark interest rate, Yi pointed to a long-awaited reform to the rate framework that could help lower borrowing costs for the real economy.
In that reform, Yi said the benchmark lending rate will gradually fade out and be replaced by the Loan Prime Rate, or the rates banks offer to their best clients. The LPR will make reference to more market-oriented interest rates, such as the cost of medium-term loans the PBOC makes to financial institutions, Yi said.