Chinese banks keep their lending rates unchanged

Bloomberg

Chinese banks kept their main lending rates unchanged on Monday, with the start of a gradual economic recovery from Covid lockdowns and tighter monetary policy in the rest of the world clouding the outlook for more central bank stimulus.
The one-year loan prime rate was left at 3.7%, in line with forecasts and where it’s been since a reduction in January. The five-year rate, a reference for mortgages, was also maintained at 4.45%, following a record
15-basis point cut last month.
The LPRs are based on interest rates that 18 banks offer their best customers, which are given in quotes as a spread over the one-year medium-term lending facility rate. They typically move in tandem with MLF rate, a key policy rate set monthly by the PBOC.
The central bank last week refrained from reducing that rate, avoiding further divergence with a hawkish Fed that’s already led to record outflows from China’s sovereign debt and weakened the yuan.
The PBOC is now in a wait-and-see mode as it gauges the economy’s recovery from Covid lockdowns and the implications of tighter monetary policy in the rest of the world. It’s taken a relatively measured approach to stimulus this year.
, relying more on targeted support for small businesses and the property sector, taking steps to lower banks’ funding costs and putting pressure on banks to boost loans.
“The relaxation of policies, including interest rates, may have to wait until the economic data for the second quarter is out,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. “The Politburo will probably make a judgment on the economy in its July meeting, and if the economic recovery is still slow then, there might be further policy easing.”
A state media report on Monday hinted at some of that government support. Shanghai Securities News said China is planning “extraordinary” new policies to help downstream industrial firms that have seen their profits hit by the high cost of raw materials. It didn’t provide specific details and didn’t cite a source for the information.
The benchmark CSI 300 Index rose 0.7% as of mid-day break on Monday, helped by expectations of more monetary and fiscal easing measures. The onshore yuan strengthened 0.65% as of 12:27 p.m. local time and the currency trading offshore gained 0.6%.