Daily Management Review

China Maintains Benchmark Rates But The PBOC Treads Carefully


China Maintains Benchmark Rates But The PBOC Treads Carefully
In accordance with market predictions, China kept benchmark lending rates constant at a monthly fixing on Thursday.
Even while there has been a surge in recent data indicating that further support is required to stabilise an uneven economic recovery, the consistent monthly LPR fixes highlight that Beijing's monetary easing measures have been constrained by contracting interest rate margins and a declining currency.
The five-year loan prime rate (LPR), which remained at 3.95%, was not altered from its 3.45% one-year LPR.
Twenty-one, or seventy percent of the thirty market players surveyed by Reuters this week anticipated that both rates would remain constant.
Official statistics released on Monday revealed that China's new house prices dropped in May at the quickest rate in over 9-1/2 years, indicating that the housing market remained weak despite government measures to control excess and assist indebted developers.
China's new bank lending increased significantly less than anticipated in May, and several important money indicators fell to all-time lows, indicating that the second-biggest economy in the world is still having difficulty picking up the pace of recovery.
In China, the one-year LPR is the basis for the majority of newly issued and existing loans, whereas the five-year rate affects mortgage pricing.
In an effort to boost the housing market, the five-year LPR was decreased by a respectable 25 basis points in February.
This week, a column published in Financial News, a daily supported by the central bank, stated that although China still has capacity to cut interest rates, doing so would be difficult due to both internal and foreign obstacles.