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China Holds Key Lending Rates As Expected

China’s central bank left its benchmark lending rates unchanged on Monday as any additional easing could weaken the currency.

As expected, the People’s Bank of China kept the one-year loan prime rate, or LPR, unchanged at 3.45 percent. Previously, the bank had lowered the rate by 10 basis points in August. The five-year LPR, the benchmark for mortgage rates, was retained at 4.20 percent for the fifth consecutive time. The Chinese central bank fixes the LPR monthly based on the submission of 18 designated banks. The LPR replaced the traditional benchmark lending rate in August 2019.

Markets widely expected the PBoC to leave the rates unchanged today after the rate on medium-term lending facility, which acts as a guide to loan prime rates, was maintained at 2.50 percent last week.

Although the recent economic data suggested that the economy is set to avoid a substantial slowdown, real estate market and unfavorable external conditions pose downside risks to growth.

Beijing is widely expected to achieve its growth target of around 5.0 percent this year.

The <a href= target=_blank >International Monetary Fund</a> forecast China’s economy to expand 5.4 percent this year before slowing to 4.6 percent next year.

Lowering lending rates would support the beleaguered property sector but such a move will add downward pressure on the yuan.

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