China holds rates steady as growth momentum faces risks
The People's Bank of China has maintained the one-year interest rate at 3.1 per cent and the five-year LPR at 3.6 per cent. These rates have remained unchanged since the quarter-percentage point cut in October 2024.
As CNBC reports, the decision by China's central bank regarding interest rates follows the American Federal Reserve's decision to keep its benchmark interest rates unchanged. However, Fed officials have indicated a potential half-point cut in interest rates by 2025. Beijing is striving to bolster economic growth and stabilise its currency amid growing trade tensions.
- Policymakers recognize the country’s robust growth momentum while remaining cautious due to persistent pressures ahead - said Bruce Pang, an associate at the Chinese University in Hong Kong, as cited by CNBC. He referred to risks associated with trade tensions, the Fed's stable policy stance, and the already narrow net interest margins of Chinese banks.
China's economy demonstrated moderate acceleration in the first two months of the year, with retail sales increasing by 4.0 per cent compared to the previous year, quicker than the 3.7 per cent growth recorded in December. Industrial production also surpassed expectations, rising by 5.9 per cent year-on-year.
Inflation data, however, highlighted the need for greater support from monetary policy to sustain the economic recovery. Consumer price inflation in February fell into negative figures for the first time in over a year, while producer price deflation continued.
