China stood pat on its benchmark lending rates for corporate and household loans, as expected, on Monday, with global central banks’ rate increases making it tough for Beijing to stimulate a weak domestic economy by lowering rates, reports Reuters.
Markets widely believe that Chinese policymakers are wary of risks that the yuan will depreciate and capital outflows will be triggered if they embark on further monetary easing to underpin a COVID-19-hit economy at a time when other major economies are tightening their rates policies.
The one-year loan prime rate (LPR) was kept at 3.70%, and the five-year LPR was unchanged at 4.45%. “Perhaps there is some reluctance in loosening monetary policy to support economic activity, which could reflect some caution in moving in the opposite direction to other central banks, particularly the Federal Reserve,” said Stephen Innes, managing partner at SPI Asset Management.