China is holding benchmark lending rates steady as the Fed signals fewer cuts ahead

China kept its key lending rates unchanged on Friday, as Beijing faces the challenge of boosting economic growth while supporting the weak yuan.

The People's Bank of China said it would stabilize The prime interest rate on a one-year loan is 3.1%, and the interest rate on five-year loans is at 3.6%. The 1-year LPR affects loans to businesses and most households, while the 5-year LPR serves as a reference for mortgage rates. This step was expected, according to a Reuters poll of 27 economists.

The interest rate decision came against the backdrop of widespread expectations of a rise of 25 basis points Reduce rate by US Federal Reserve Wednesday. The Fed also indicated that it would cut interest rates only twice in 2025, fewer than the four cuts forecast at the September meeting.

Analysts He said The Fed's revised forecasts for future interest rate cuts are unlikely to have a significant impact on the path of policy easing by China's central bank, although they may pressure the Chinese yuan.

The People's Bank of China does not appear to be stepping in to defend the yuan, Farzin Azarm, managing director of equity trading at Mizuho Bank Americas, told CNBC's “Street Signs Asia” on Friday.

“But really, what's the point of that? … I think at this point it really depends on what interest rates do. I think it actually depends on what the curve does in the United States and I think the central bank will move,” Azarm said. “You're going, to be completely honest with you.”

Earlier this month, senior Chinese officials pledged The most important meetings to set the economic agenda To strengthen monetary easing measures, including implementing interest rate cuts, to support the faltering economy.

The People's Bank of China maintained LPRs for one and five years Without change In November, after A A 25 basis point cut in October was widely expected. Central bank has surprised the markets This is by cutting key interest rates on short-term and long-term lending in July.

Major investment banks and research firms predicted The Chinese yuan will weaken further next year, in case President-elect Donald Trump follows through on his tariff threats.

Despite a wave of stimulus measures since late September, the latest economic data out of China showed that the country is still suffering from entrenched deflation, amid tepid consumer demand and a prolonged decline in the real estate market.

The Fed's future easing course will create “some room for the People's Bank of China to pursue,” Yan Wang, senior emerging markets analyst and China strategist at Alpine Macro, told CNBC.Street signs asiaOn Thursday, while stressing that fiscal easing will play a more important role in driving China's economy next year.

In a note to CNBC on Friday, Wang said he believes the People's Bank of China should continue to cut interest rates to ease the yuan's deflationary pressure against other currencies.

“At the same time, the Chinese government has greater fiscal flexibility and is likely to rely more on fiscal measures to stimulate growth,” he added.

— CNBC's Dylan Potts contributed to this report.