China left key lending rates unchanged on Monday for the third straight month as the country seeks to maintain currency stability amid expectations of further monetary easing to support economic growth.

The People’s Bank of China (PBOC) maintained the one-year loan prime rate (LPR) at 3.1%, while the five-year mortgage reference rate remained at 3.6%.

The LPR is calculated monthly by the central bank, based on contributions from 20 commercial banks.

China’s economy showed stronger-than-expected growth in the final quarter of last year, bolstered by stimulus measures introduced since September. The performance enabled the economy to meet its annual growth target. 

China’s economy met its annual growth target, expanding by 5% year-on-year in 2024. Its gross domestic product (GDP) reached 134.9084 trillion yuan (approximately 18.77 trillion U.S. dollars), according to data released by the National Bureau of Statistics on Friday.

However, analysts warn that underlying challenges, including weak consumer demand, a struggling property sector, and the potential for increased tariffs from the incoming U.S. administration, may dampen growth momentum.

PBOC Governor Pan Gongsheng suggested in September that a reduction in the reserve requirement ratio (RRR) could be implemented by the end of 2024 to enhance bank lending. Despite adopting a “moderately loose” monetary stance, such a cut has yet to materialize.

The central bank had earlier lowered short- and long-term lending rates in July and introduced a further 25-basis-point reduction in October.

China’s monetary policy in 2025

Investors are hoping for more substantial interest rate cuts this year. In December, China’s leadership signaled a shift toward a “moderately loose” monetary policy to bolster growth.

The Politburo announced earlier last month that China will implement an “appropriately loose” monetary policy in 2025, marking the first easing of its stance in 14 years.

However, this stance has driven government bond yields to historic lows, intensifying pressure on the yuan against the US dollar.

The yuan recently reached its lowest level in 16 months, prompting PBOC officials to reiterate their commitment to preventing exchange rate “overshooting.”

Measures to stabilize the currency have included issuing a record volume of central bank bills in Hong Kong and suspending certain government bond purchases.

Despite these interventions, analysts suggest the yuan may remain under pressure due to the country’s deflationary outlook.

Concerns are heightened by potential trade tensions, particularly as US President-elect Donald Trump’s administration, set to begin this week, may introduce higher tariffs on Chinese imports.

“Considerations around exchange rate stability may mean the PBOC must adopt a balanced approach,” wrote Erin Xin, Greater China economist at HSBC, in a recent note.

She anticipates the central bank will implement a 0.3 percentage point reduction in interest rates this year and lower the reserve requirement ratio by 0.5 percentage points. The reserve requirement ratio determines the proportion of deposits banks must hold in reserve.

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Donald Trump is preparing to re-enter the White House and there’s an amazing gift waiting for him: one of the strongest US economies in history. 

With low unemployment, robust GDP growth, and easing inflation, Trump is stepping into conditions few presidents have enjoyed. 

But this economic backdrop is not perfect. A record high federal debt, high gas prices and mortgages and worried consumers are some of the risks also waiting for him.

Ultimately, Trump’s policies will determine whether this inheritance is nurtured or squandered.

What Trump is walking into

Donald Trump inherits an economy characterized by key metrics that indicate exceptional strength. 

Unemployment stands at 4.1%, which is the lowest transition rate since George Bush took office in 2001.

This low rate is accompanied by a strong labor market, with private-sector job growth maintaining healthy momentum.

The prime-age employment-to-population ratio, which measures the share of individuals aged 25 to 54 with jobs, reached 80.5% in late 2024, the highest level seen since 2000.

The US labor market has rebounded more robustly than most other advanced economies following the COVID-19 pandemic.

Economic growth also paints an encouraging picture. Real GDP grew by 2.4% in 2024, outpacing the 2021 growth rate at the start of Biden’s term and even the economy’s performance during Trump’s initial inauguration in 2017.

Notably, the US economy is now operating above many estimates of its potential. 

Inflation, which reached a peak of 9.1% in mid-2022, has moderated to 2.7%, approaching the Federal Reserve’s target of 2%. This stabilization has provided some relief to consumers and policymakers alike.

The financial markets are also reflecting a period of prosperity and resilience.

According to figures by the Economic Policy Institute, the stock market posted an inflation-adjusted growth of 28.8% in 2024.

This was comfortably the strongest pre-transition market performance in decades, with the average being 6.5%. 

The hidden cracks in US economy

While the economy looks strong on paper, underlying vulnerabilities could complicate Trump’s efforts to sustain growth. 

As of January 2025, the US debt stands at a record $36.2 trillion.

This surge is partly due to fiscal stimulus under both Trump’s first term and Biden’s administration, including the $1.9 trillion American Rescue Plan and subsequent spending on infrastructure and green energy initiatives.

Historically, deficits of this magnitude have been justified during recessions or crises. In contrast, today’s deficit persists despite robust GDP growth and low unemployment, which puts long-term fiscal sustainability in question.

Additionally, gas prices averaged $3.50 per gallon in 2024, the highest for an inauguration in US history.

Mortgage rates stand at 6.9%, significantly higher than during the 2010s. This combination has eroded housing affordability to near-record lows, squeezing middle-class households.

Despite wage growth outpacing inflation, wealth inequality remains entrenched.

During Biden’s term, the richest Americans saw their net worth soar, while many middle- and lower-income families struggled with rising costs for essentials like housing, healthcare, and education.

Finally, consumer sentiment remains tepid.

The University of Michigan’s consumer confidence index was 73.2 in December 2024, far below historical norms.

Americans still feel the sting of inflation and rising costs, even as wage growth outpaces price increases.

Trump’s policy toolbox

Trump’s second term promises a bold economic agenda, but his proposed policies carry significant risks. His plans to implement tariffs, mass deportations, and tax cuts could potentially undermine the advantages he inherits.

Raising tariffs, for example, may generate additional revenue for the government in the short term, but it risks increasing consumer prices and reducing household purchasing power.

Tariffs could also strain international trade relationships, impacting businesses that rely on global supply chains. While the inflationary impact of tariffs may be limited to a one-time adjustment, they could dampen consumer confidence and spending.

Deportations, another key policy proposal, could reduce the labor supply, leading to higher wage growth but also fueling inflationary pressures.

Labor shortages may hinder productivity and economic efficiency, creating broader challenges for industries reliant on immigrant workers.

This policy also runs counter to the goal of price stability, which is critical in maintaining the economy’s current trajectory.

Finally, extending the 2017 Tax Cuts and Jobs Act poses fiscal risks.

While the policy may align with Trump’s political priorities, it offers limited economic benefits in the current environment.

With the economy already performing strongly and interest rates high, additional tax cuts could exacerbate the federal deficit and increase borrowing costs.

These outcomes could erode the fiscal flexibility needed to address future challenges.

Economists caution that these policy moves, if pursued aggressively, could introduce uncertainty into an otherwise stable economic environment.

Missteps could disrupt the momentum of growth, job creation, and inflation moderation that Trump inherits.

Donald Trump enters office with an enviable economic inheritance, but this advantage comes with high expectations. 

The economy is strong, but far from solid. Markets are at their all-time highs which makes them vulnerable to volatility and unexpected news. Investors and consumers are still worried about the future outlook.

Trump’s success will depend on his ability to avoid policy overreach and focus on sustainable growth.

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As Donald Trump prepares to be sworn in as US president today, his impending leadership has created a new dilemma for Western companies still operating in Russia, forcing them to reassess how his policies might impact their business interests.

A Reuters report, based on discussions with lawyers, bankers, advisers, and business leaders involved in numerous Western corporate exits from Russia, reveals that companies still operating in the country are closely monitoring Trump’s potential actions and adapting their strategies accordingly.

Since Moscow’s invasion of Ukraine in February 2022, over a thousand multinational firms have faced the difficult decision of whether to stay or leave.

Many, including household names like Renault, McDonald’s, and Heineken, opted to exit, absorbing substantial losses through writedowns and discounted asset sales dictated by Russian authorities.

However, a number of companies have chosen to remain.

Consumer goods producers like PepsiCo, Procter & Gamble, and Mondelez defend their presence in Russia by citing the humanitarian importance of their products, while financial institutions such as Raiffeisen Bank International and UniCredit are constrained by profits trapped in the country and the complex approval process required for exit.

The cost of leaving Russia has risen sharply since October when Moscow introduced stricter exit terms.

Companies are now required to sell their assets at a minimum 60% discount and contribute 35% of the deal’s value to the Russian budget—a charge referred to by US officials as an “exit tax.”

This policy has added a significant financial burden to multinationals looking to cut ties with Russia.

Trump’s return: a potential game-changer?

With Trump’s inauguration, many companies are recalibrating their plans for Russia.

His administration’s promises to negotiate an end to the Ukraine conflict, even if unlikely to be fulfilled quickly, have created a new layer of geopolitical complexity.

“Trump’s election victory adds another layer of uncertainty for multinationals with assets in Russia,” said Ian Massey, Head of Corporate Intelligence, EMEA, at global risk consultancy S-RM.

While the Kremlin continues to ratchet up the costs of leaving the Russian market, Trump may reduce the costs of staying, creating a kind of stasis.

Legal and financial advisers working with companies in Russia note that Trump’s return could provide political cover for firms that decide to stay, while others may wait for potential sanctions relief that could make exits easier.

Alan Kartashkin, a partner at Debevoise and Plimpton, suggested that even limited sanctions relief might unfreeze foreign-owned assets stuck in Russia, unlocking another wave of divestments.

“We might see some sanctions being dialled down if the new administration is able to negotiate a settlement of the conflict in Ukraine,” he said.

The cost of leaving Russia

For companies aiming to leave Russia, the path has become significantly more arduous.

Moscow has implemented strict rules governing asset sales, requiring valuations by government-approved appraisers and auctions between local buyers.

High-value deals exceeding 50 billion roubles ($488 million) must be personally approved by President Vladimir Putin, with buyers required to demonstrate how the purchase benefits the Russian economy.

“The possibility of selling a large asset at the minimally accepted conditions is significantly limited,” said a Russian lawyer involved in corporate exits.

These hurdles have dramatically reduced the number of deals, now less than 20% of their mid-2023 peak, according to advisers.

Financing challenges compound the issue. With interest rates at 21%, the cost of borrowing is prohibitively high for many potential buyers, further shrinking the pool of eligible bidders.

The risks of staying in Russia

For companies that choose to remain, the risks are significant.

Moscow has placed more than a dozen foreign-owned assets under temporary state control, a move widely seen as a negotiating tactic to push down prices for local buyers.

Carlsberg learned this the hard way when its stake in Baltika Breweries was seized in July 2023, derailing a nearly finalized sale.

The Danish brewer eventually secured a 34-billion-rouble ($413 million) deal in December, but not without considerable delays and uncertainty.

Unilever managed to divest its Russian assets, including four factories, just before stricter rules took effect in October.

The deal, worth close to €500 million, marked a rare success story for a multinational navigating Russia’s tightened exit regime.

Trump’s wildcard effect

Trump’s return to the White House presents both risks and opportunities for Western companies.

On one hand, his administration could facilitate the easing of sanctions, potentially creating a window for smoother exits.

On the other, his unpredictable approach to international relations could lead to new complications.

“Trump is a wild card,” said a financial services professional familiar with Russia’s business environment.

“You just don’t know what he’s going to do,” he said.

For now, many multinationals are adopting a wait-and-see approach, weighing the costs of leaving against the risks of staying in an increasingly volatile market.

The coming months will likely determine whether Trump’s presidency shifts the balance in their favor—or adds new layers of uncertainty to an already fraught decision.

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Gold prices were little changed on Monday as traders awaited the inauguration speech of President-elect Donald Trump later today. 

“The US Dollar (USD) kicks off the new week on a softer note and erodes a part of Friday’s positive move amid bets that the Federal Reserve (Fed) will cut interest rates twice this year amid signs of abating inflation in the US,” Haresh Menghani, editor at FXstreet, said in a report. 

This, along with uncertainty over US President-elect Donald Trump’s tariff plans, lifts the safe-haven precious metal back above the $2,700 mark in the last hour.

Traders were anticipating to get some clues about Trump’s policies during the inauguration speech later on Monday. Gold prices could be volatile as Trump begins his second term as the US president. 

At the time of writing, the February gold contract on COMEX was largely steady at $2,748.31 per ounce. 

Trump 2.0: traders brace for volatility

Gold traders are preparing for a period of heightened volatility as President Trump embarks on his second term in office. 

The President’s forthcoming policy announcements are expected to have a significant impact on market dynamics, and traders are positioning themselves accordingly.

Gold, often seen as a safe-haven asset in times of economic uncertainty, has recently seen its price stabilize near a one-month high. 

This price stability has been attributed in part to subdued US inflation data, which has led to speculation that the Federal Reserve may cut interest rates in the near future.

The current market sentiment is being shaped by a complex interplay of factors, including potential policy changes from the Trump administration and the Federal Reserve’s monetary policy. 

Some analysts suggest that a strong and decisive start to Trump’s second term could bolster the US dollar, which could in turn put downward pressure on gold prices. 

Conversely, a more gradual and measured approach from the administration could weaken the dollar, potentially leading to an increase in gold prices.

Fed’s rate cut uncertainty

“Interest rate expectations have recently come back into focus. Following the lower-than-expected US inflation data, the market is again pricing in slightly more Fed rate cuts,” Carsten Fritsch, commodity analyst at Commerzbank AG, said. 

If the Fed decides to cut interest rates, it could weaken the dollar and make gold more attractive to investors. 

On the other hand, if the Fed maintains its current interest rate policy or raises rates, it could strengthen the dollar and put downward pressure on gold prices.

In addition to these factors, geopolitical tensions, global economic growth, and investor sentiment can all impact gold prices. As such, gold traders are closely monitoring developments in these areas and adjusting their strategies accordingly.

Gold’s rally has been tempered after Israel and Hamas agreed to a ceasefire agreement, which could dampen demand for safe-haven assets. 

Menghani said:

Traders might also refrain from placing aggressive directional bets ahead of Trump’s inaugural address later this Monday and a US holiday in observance of Martin Luther King Jr. Day.

Can gold prices hit $2,800?

Analysts at FXstreet said gold prices could climb further if the yellow metal decisively breach the $2,725 per ounce mark. 

At present prices are around $2,750 per ounce, and the immediate resistance was $2,762. 

“The XAU/USD might eventually aim towards challenging the all-time peak, around the $2,790 region touched in October 2024,” Menghani added.

However, the key was today’s speech by Trump, which is likely to shape both commodity and financial markets. 

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