China kept its benchmark interest rate for corporate and household lending unchanged on Monday as widely expected by the market. However, market strategists notes monetary stimulus is building amid mounting external risks slowing down the Chinese economy.
The one-year loan prime rate (LPR) was held at 3.70% while the five-year LPR remained at 4.60%.
Contrary to other global central banks tightening polices, the People’s Bank of China maintained a loose policy measure, the market now expects the central bank to ease policy measures to revive the economy.
Win Thin, global head of currency strategy at Brown Brothers Harriman, said more policy stimulus will be needed to meet the country’s growth target of around 5.5% for this year, as reported by Reuters.
“We see another round of rate cuts coming in early Q2,” he said in a note earlier in the day.
Chinese Vice Premier Liu He, who is responsible for broad economic policy in the country, last week urged the roll-out of market-friendly policies to support the slowing economy.
Liu’s comments reinforced some market expectations for monetary easing in coming months and many expect the PBOC to cut the reserve requirement ratio (RRR) for banks and other policy rates.
“There is no precedent of lowering LPR without a RRR or policy rate cut,” Citi analysts said in a note.
