China keeps interest rates steady amid growth momentum
The People's Bank of China kept the 1-year interest rate at 3.1 percent and the 5-year LPR at 3.6 percent. These rates have remained unchanged since a quarter-percentage point cut in October 2024.
As CNBC reports, China's central bank's decision on interest rates follows the direction of the American Federal Reserve, which also kept its benchmark interest rates unchanged. However, Fed officials hinted at a possible half-point rate cut by 2025. Beijing aims to support economic growth and stabilize its currency amidst 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 quoted by CNBC. He referred to risks from trade tensions, the Fed's stable policy stance, and the already low net interest margins of Chinese banks.
China's economy showed moderate acceleration in the first two months of the year, with retail sales increasing by 4.0 percent compared to the previous year, faster than the 3.7 percent growth recorded in December. Industrial production also exceeded expectations, rising by 5.9 percent year-over-year.
Inflation data, however, underscored the need for more monetary policy support to maintain the economic recovery. Consumer price inflation in February turned negative for the first time in over a year, while producer price deflation continued.
