Investing.com — The People's Bank of China left its benchmark loan prime rate unchanged on Monday, as widely expected, following some recent improvements in China's economy, but the central bank remains hopeful it will eventually cut rates. It is expected.
The central bank kept interest rates unchanged at 3.45%, while the interest rate used to set home loan rates remained unchanged at 3.95%.
Both interest rates hit record lows as the Chinese government sought to stimulate economic growth by easing local financial conditions as much as possible. To this end, the People's Bank of China lowered the five-year LPR in February to support the real estate market. The LPR is determined by the People's Bank of China based on consideration from 18 designated commercial banks and is used as a benchmark for domestic lending rates.
China's economy picked up some pace in the first quarter of 2024, with recent data showing slightly faster-than-expected growth. The economy also remained on track to achieve the government's annual growth target of 5%.
Much of this strength came from increased government capital spending and investment.
However, the deflationary trend continues, the crisis in the real estate market deepens, global demand for China's exports remains weak, and personal consumption remains sluggish.
Therefore, investors continued to expect the People's Bank of China to cut the LPR further by the end of the year, especially since economic data in March already showed slowing growth.
However, it remains to be seen how much the central bank will cut interest rates, given that the Chinese government has also become increasingly uncomfortable with the recent decline in interest rates.
