China kept its benchmark lending rates unchanged, as widely expected, on Thursday.
The one-year loan prime rate was maintained at 3.85 percent and the five-year loan prime rate was kept unchanged at 4.65 percent.
The one-year and five-year loan prime rates were last lowered in April 2020. The one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points in April 2020.
Markets have expected the rates to remain on hold today as the People’s Bank of China had kept the rate on its medium-term lending facility unchanged early this month.
The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This lending rate replaced the central bank’s traditional benchmark lending rate in August 2019.
With the economy well above its pre-virus trend, policymakers are focused on tackling financial risks, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said. But there are few signs that these efforts are likely to include policy rate hikes.
The upshot for the economy is that, even if rates are left on hold, tighter credit conditions will become an increasing headwind over the coming quarters, economists noted.