Central banks in Asia face challenges in adjusting monetary policies in 2024
(MENAFN) In 2024, central banks across Asia faced a challenging year as they adjusted their monetary policies to respond to shifting global economic conditions and regional pressures. While some, such as the People's bank of China (PBoC), Hong Kong’s Monetary Authority (HKMA), and South Korea's Bank of Korea, pursued monetary easing measures, others, notably Japan’s Bank of Japan (BoJ), broke from their long-standing policies. The BoJ raised interest rates for the first time in 17 years, marking a significant policy shift.
Throughout the year, the PBoC and the Bank of Korea implemented two rounds of interest rate cuts, while the HKMA made three rate reductions. These actions were taken to combat inflation and address specific economic challenges in the region. Conversely, the BoJ, which had held ultra-low interest rates for many years, ended the year with two rate hikes, signaling a change in its long-standing accommodative stance.
The PBoC made notable adjustments to its policy, reducing its one-year borrowing rate (MLF) by 20 basis points in July and 30 basis points in September, bringing the rate to 2 percent by year’s end. The MLF rate, a key tool in China’s monetary policy, allows banks to access medium-term loans from the central bank in exchange for securities. These cuts were largely driven by weak domestic demand and ongoing issues in China’s real estate sector, which has been a significant drag on the economy.
In addition to lowering the MLF rate, the PBoC also cut the one-year and five-year loan prime rates (LPRs). The one-year LPR, used for corporate loans, was reduced by 10 basis points in July and 25 basis points in October, while the five-year LPR, a benchmark for real estate loans, was lowered by 25 basis points in February, 10 basis points in July, and another 25 basis points in October. These cuts were seen as necessary to address low demand in the real estate sector and falling housing prices, which had placed additional strain on China’s economic growth.
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