SHANGHAI (Reuters) – China left key lending rates unchanged for a third straight month, as expected, as a weak yuan curbed Beijing's efforts to ease monetary policy.
At Monday's monthly fixing, the key one-year loan interest rate was kept at 3.1%, while the five-year interest rate remained unchanged at 3.6%.
Most new and outstanding loans in China are based on the one-year loan interest rate, while the five-year rate affects mortgage pricing.
In October 2024, Chinese lenders lowered lending standards by larger-than-expected margins to revive economic activity.
Why is it important
China's economy met the government's ambitions for 5% growth last year, effectively reducing the urgency for imminent monetary stimulus at a time when the yuan currency faces renewed depreciation pressures.
'Narrowing the interest rate spread also limits the scope for monetary easing.
In numbers
The prime interest rate on the one-year loan was kept at 3.1%, while the interest rate on the five-year loan remained unchanged at 3.6%.
Context
China has intensified measures ranging from verbal warnings, adjusting capital flows and issuing banknotes to put a floor on the falling yuan.
The derivatives market shows that investors are backing off their bets on near-term interest rate cuts in China, with expectations growing that the authorities will refrain from easing policy when the yuan weakens.
China will adopt an “appropriately loose” monetary policy in 2025, the first easing of its stance in about 14 years, along with a more proactive fiscal policy to stimulate economic growth, the Politburo said earlier last month.
