China likely to hold benchmark lending rates steady
A Reuters survey indicates China will likely keep its one-year and five-year loan prime rates at 3.00% and 3.50% this month. While economic growth slowed in April due to weak demand and rising energy costs, ample interbank liquidity has reduced the pressure on the central bank to ease policy.
China is expected to keep its benchmark lending rates unchanged for a 12th consecutive month on Wednesday, May 22. All 24 market participants surveyed by Reuters predict the one-year and five-year Loan Prime Rates (LPR) will remain at 3.00% and 3.50%, respectively. The decision signals a preference for maintaining liquidity over aggressive easing despite cooling industrial output and retail sales.
### Liquidity Surplus Reduces Easing Pressure The People's Bank of China (PBOC) has little incentive to lower rates because interbank cash supplies remain high. The LPR, normally charged to banks' best clients, is calculated each month after 20 designated commercial banks submit proposed rates to the National Interbank Funding Center. Analysts at Huachuang Securities said the PBOC is unlikely to cut reserve requirement ratios or interest rates while interbank rates run below policy rates. The average overnight repo rate has hovered around 1.2% over the past month, its lowest level since August 2023.
