People’s Bank of China kept rates unchanged

In line with economists’ forecasts, the People’s Bank of China (PBOC) kept the one-year loan prime rate at the same level of 3.65%. The five-year rate also remained unchanged at the level of 4.3%.

Economists outline a high probability of the five-year rate’s decline in the upcoming months. This move will allow the government to stimulate housing demand ahead of potential policy easing in the property market. Currently, the housing market is experiencing a record fall in history. Prices have been continuously going down for more than a year. 

China’s central bank has found ways to maintain liquidity in the financial system without changing lending rates. For instance, this month, the reserve requirement ratio for banks was reduced. This move is likely to ease the excessive financial burden of banks, giving them a chance to lower lending rates in the future.

Amid uncertain economic prospects, the PBOC is acting rather cautiously. Recently, the country’s economic growth has slowed down significantly, feeling the pressure of an abrupt cancellation of COVID-19 restrictions. However, economists expect China’s economy to recover in the following year. They also predict a possible rise in inflation.