China left its benchmark lending rates unchanged for the fifth straight month despite the economy struggling to gain traction.
The People’s Bank of China on Friday kept its one-year loan prime rate, or LPR, unchanged at 3.65 percent. Similarly, the five-year LPR, the benchmark for mortgage rates, was maintained at 4.30 percent.
Previously, the bank had reduced the five-year LPR rate by 15 basis points each in May and August, and by 5 basis points last January. The one-year LPR was last reduced in August.
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 had widely expected the PBoC to retain the LPR as the medium-term lending facility, or MLF, which acts as a guide to the LPR, was kept unchanged at 2.75 percent last week. The bank had added CNY 779 billion via MLF.
The second largest economy expanded only 3.0 percent in 2022, marking the weakest expansion in decades and well below the government’s full year target of around 5.5 percent.
China’s provinces are projecting economic growth of 5-6 percent for 2023. The government’s full year target will be announced at the National People’s Congress in March.
Last week, the World Bank said activity in China remains vulnerable to a prolonged drag from the real estate sector and continued pandemic-related disruptions. The lender forecast China’s economy to expand 4.3 percent in 2023 and 5.0 percent next year.
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