(RTTNews) - China's central bank left its benchmark lending rates unchanged on Tuesday after cutting the rates unexpectedly by 10 basis points last month.
The People's Bank of China kept its one-year loan prime rate unchanged at 3.35 percent. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.85 percent.
The PBoC fixes the LPR monthly based on the submission of 18 designated banks. However, Beijing has influence over the fixing. The LPR replaced the traditional benchmark lending rate in August 2019.
Late last month, the PBoC announced an off-schedule cut in the medium-term lending facility by 20 basis points, which was the first such move in almost a year. The MLF usually acts as a guide to loan prime rates. However, last month, the reduction in the loan prime rates preceded the MLF cut.
In July, the bank had also cut the interest rate on seven-day reverse repos to 1.7 percent from 1.8 percent.
ING economists said they expect one further rate cut in LPR this year and two more cuts in 2025, but recent developments increase the odds of seeing multiple cuts before year-end.
They said future rate cuts will likely start from the 7-day reverse repo rate, similar to what seen in July, potentially as early as September.
Markets expect the PBoC to cut its interest rates again this year as economic growth remains sluggish. Beijing faces severe challenges to achieve its ambitious growth target of around 5.0 percent this year.
The second-largest economy grew only 4.7 percent in the June quarter after rising 5.3 percent in the preceding period.
