China leaves benchmark lending rates unchanged as expected
economic data suggested the economy is stabilising and a weaker yuan constrained further monetary easing.
The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 4.20%.
Better-than-expected third quarter gross domestic product (GDP) and retail sales data suggest China's economic recovery has started to improve, needing less monetary support.
«Economic activity has stabilised and authorities can afford to wait a while before deploying more monetary easing down the road,» emerging market analysts at TD Securities said in a research note.
Bearish sentiment over the yuan was also seen as a factor against further rate cuts.
The yuan has depreciated by more than 5% this year against the dollar and increasing liquidity would add additional pressure on the currency.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
In a Reuters survey of 29 market analysts and traders, almost all participants predicted no change to the one-year LPR, while all had expected the five-year rate to remain steady.
The steady LPR fixings follow the central bank's decision on Monday to roll over maturing medium-term policy loans while keeping the interest rate on them unchanged.
The medium-term lending facility (MLF) rate serves as a guide to the LPR and markets see it as a precursor to any changes to the lending benchmarks.
While the rates were left unchanged, the PBOC injected the biggest cash support since late 2020 on Monday to allow banks to extend credit at a time when funding conditions were tight due to heavy bond supplies and tax payments collected by the government.
For the next few months, market participants are
