A man passes by the headquarters of the People’s Bank of China in Beijing on May 7, 2025. SHANGHAI, May 20 (Reuters) – On Wednesday, China opted to keep its benchmark lending rates unchanged for the 12th month in a row, aligning with market forecasts. This decision is noteworthy as robust liquidity in the interbank market and the tone of the People’s Bank of China’s quarterly report indicate that policymakers are not in a hurry to decrease rates, despite ongoing weaknesses in economic activity and lending. According to a Reuters survey of 20 market participants conducted this week, all respondents anticipated no alterations to either the one-year loan prime rate (LPR), which remains at 3.00%, or the five-year LPR, held steady at 3.50%. It is essential to note that the seven-day reverse repo rate, which influences LPR pricing, has also remained stable this year. China’s economic growth slowed in April, with industrial production cooling and retail sales plunging to their lowest levels in over three years, hindered by rising energy costs from the Iran conflict and persistently weak domestic demand. Economic analysts from TD Securities predict the PBOC will likely be cautious about rate cuts aimed at boosting growth following a rise in producer prices, reflecting potential inflation concerns. They anticipate targeted fiscal stimulus from Beijing, particularly in infrastructure, rather than broad measures. Similarly, Huatai Securities highlighted that for the first time, the central bank described its monetary policy as ‘targeted and effective’ alongside ‘moderately loose’ in its first-quarter report, emphasizing the need to bolster the economy’s inherent growth drivers, suggesting reduced support for extensive easing measures.
