China Maintains Lending Benchmarks for 11 Consecutive Months in April

On April 8, 2024, a man walks past a sign for the People's Bank of China (PBOC) in Beijing. SHANGHAI, April 20 (Reuters) - China's decision on Monday to keep the benchmark loan prime rates (LPRs) unchanged for the 11th month running reflects market predictions. The stability comes as solid economic growth at the beginning of the year and a rise in inflation diminish the urgency for further monetary easing to bolster the economy. The one-year LPR remains at 3.00%, while the five-year LPR is steady at 3.50%. In a recent Reuters survey of 20 market experts, every participant anticipated that neither rate would change. The Chinese economy's annual growth rate of 5.0% in the first quarter aligns with its full-year target of 4.5%-5.0%, demonstrating resilience that distinguishes it from much of Asia, aided by robust strategic oil reserves and a varied energy portfolio. Additionally, China's factory-gate prices saw their first increase in over three years in March, signaling that the ongoing conflict in Iran is exerting cost pressures on the world's second-largest economy. Analysts from DBS noted that without significant signals of a sharp slowdown and with credit demand yet to rebound, policymakers are expected to favor targeted easing rather than sweeping rate reductions. Furthermore, analysts at Societe Generale suggested that despite the strong GDP figures from the first quarter, it's likely that no significant easing measures will be introduced at the upcoming late-April Politburo meeting, even considering the geopolitical tensions in the Middle East. They project that, under a scenario of a contained conflict lasting only a few months, further fiscal stimulus will not be forthcoming this year, with only a potential rate cut from the PBOC anticipated towards the end of the year.