At monthly fixing, the one-year prime lending rate (LPR) was held at 3.70%, and the five-year LPR remained unchanged at 4.45%, in line with market expectations of 22 respondents in the snapshot poll. from Reuters made this week.
China, along with Japan, has been a major exception in the global round of policy tightening aimed at tackling runaway inflation, with Beijing focusing on stimulating the COVID-stricken economy.
However, analysts say there is less and less need for aggressive monetary easing after June economic data showed signs of recovery, even though China’s gross domestic product in the second quarter did not rise. only 0.4% compared to the previous year.
“The economy has started to recover and there is no need to lower the LPR,” said Xing Zhaopeng, senior China strategist at ANZ.
But Xing still sees the possibility of LPR cuts in the fourth quarter of this year. Many economists expect the Chinese economy to face increased pressure in the coming months due to slowing global growth and a hit to consumption from soaring consumer prices.
The People’s Bank of China (PBOC) had recently signaled less accommodative monetary policy in the second half of the year.
A PBOC official told a press conference last week that liquidity conditions were ample, suggesting there is no urgent need to lower key lending rates further.
“Overall, the last tone implies that the PBOC is not in any rush to reduce its RRR or short-term LPR,” said Tommy Xie, head of Greater China research at OCBC Bank.
“We believe that monetary policy may not be the best tool to solve the current housing problem, when the focus is likely to be on fiscal policy and administrative measures.”
The Chinese real estate market, which has been hit hard by a debt crisis, is facing increased pressure due to fear caused by the proliferation of threats by homebuyers to withhold payments for stalled projects.
China cut the five-year LPR by an unexpected 15 basis points in May as policymakers sought to revive the struggling housing sector and support the economy.
Most new and outstanding loans in China are based on the one-year LPR. The five-year rate influences the pricing of mortgage loans.