MARKET OVERVIEW - China's Benchmark Lending Rate Expected to Remain Unchanged

According to Moody's Analytics economists, Chinese banks will not change the benchmark lending rate. Following the other reductions implemented since the end of September, it is expected that the benchmark lending rates will remain stable. Moody's Analytics stated, "This means that the one-year and five-year lending rates will stay at 3.1% and 3.6% respectively until December." They argue that despite China's monetary settings being on a loosening trajectory since the Fed cut the policy rate by 25 basis points this month, the weakening yuan, which has deteriorated since Trump's victory in the U.S. elections, serves as a counter factor. They believe the People's Bank of China will remain on hold until the Trump administration takes office in January and a clearer picture of China's trade policy emerges.