FX.co ★ China Keeps Benchmark Rates Unchanged As Expected

China's central bank maintained its benchmark rates on Thursday, as widely expected, as the economy logged a strong growth after the unwinding of zero-Covid policy.

The People's Bank of China left its one-year loan prime rate, or LPR, unchanged at 3.65 percent. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 4.30 percent.

Earlier, the bank had reduced the five-year LPR rate by 15 basis points each in May and August 2022, and by 5 basis points in January 2022. The one-year LPR was last lowered in August 2022.

The LPR is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. The LPR replaced the central bank's traditional benchmark lending rate in August 2019.

Markets widely anticipated the PBoC to hold the LPR today as the <a href=https://www.rttnews.com/3356368/china-keeps-medium-term-lending-facility-rate-at-2-75.aspx target=_blank >medium-term lending facility</a>, or MLF, which acts as a guide to the LPR, was kept unchanged early this week.

On Monday, the PBoC had added CNY 170 billion via one-year MLF at an interest rate of 2.75 percent. The bank also conducted seven-day reverse repo operations worth CNY 20 billion at a rate of 2.00 percent.

In the first quarter, the second-largest <a href=https://www.rttnews.com/3356685/china-economy-rebounds-in-q1-on-strong-spending.aspx?refresh=1 target=_blank >economy </a>logged an annual growth of 4.5 percent, stronger than the 2.9 percent expansion registered in the fourth quarter of 2022, official data showed early this week.

After a weaker 3.0 percent economic growth in 2022, the Chinese government set a moderate growth target of around 5.0 percent for this year.

The <a href=https://www.rttnews.com/3355570/imf-trims-global-growth-forecast-warns-of-fragility.aspx target=_blank >International Monetary Fund</a> had projected growth outlook for China at 5.2 percent this year and 4.5 percent in 2024.