People’s Bank of China (PBOC) Building on Thursday, December 15, 2022 in Beijing, China.
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China kept its debt prime rates unchanged on Monday with expectation, at 3.1% with 1-year LPR and 5-year at 3.6%.
The decision of People’s Bank of China comes when China reported a better-and-and-intake economic data in this month, with the first quarter GDP to grow from 5.4% year-on-year, which allows it to keep the rates stable.
Retail sales and industrial output numbers for March also defeat expectations from economists voted by Reuters.
1-Year LPR affects corporate and most domestic loans in China, while the 5-year LPR acts as a benchmark for mortgage rates. PBOC has kept LPRS stable since October last year.
After the announcement, Chinese onshore yuan The flat was trading at 7.2995 against the dollar, while the offshore yuan strongly strengthened 7.2962 against Greenback.
This hold was a Reuters Pole of Hold Economists, 87% expected PBOC to keep the rates stable.
Dutch Bank ING also estimated in a note last week that PBOC rates would be likely, analysts Lynn Song and Min Xu Kang said LPR was unlikely to shift without a 7-day repo rate.
The 7-day repo rate is currently 1.5%, and was last reduced by 20 basis points in September.
However, ING also stated that “the tariffs provide a strong case to relax the threats and to relax the low inflation and strong external headwinds. But the idea of currency stabilization may wait for the People’s Bank of China to wait until the US Federal Reserve cuts the cost of lending.”
The US has imposed tariffs up to 245% on Chinese imports, while China has slapped 125% of duties on US imports.
While GDP development figures were encouraging, consumer prices in the world’s second largest economy remained in the deflation sector, in March with CPI reading that prices fell 0.1% on the year.
Producer prices fell by 2.5% in March, marking the 29th straight month in the deflation sector and the biggest contraction since November 2024.
