Key facts
- China is expected to keep its benchmark lending rates unchanged for the 13th consecutive month.
- The one-year and five-year loan prime rates are predicted to remain at 3.00% and 3.50% respectively.
- The decision reflects an uneven economic recovery, with strong exports contrasting weak domestic demand.
- The People's Bank of China (PBOC) plans to enhance its management of short-term money market liquidity.
- Analysts anticipate a potential rate cut in the latter half of the year due to weak domestic demand.
China is widely anticipated to maintain its benchmark lending rates unchanged for the thirteenth consecutive month in June, according to a Reuters survey. This decision comes amid persistent economic imbalances, characterized by a 'K-shaped' recovery where robust export performance contrasts with weakening domestic demand and a prolonged property sector downturn.
The survey, which included 30 market participants, found a strong consensus that both the one-year and five-year loan prime rates (LPRs) would remain steady at 3.00% and 3.50%, respectively, at the upcoming review. Analysts suggest that policymakers are adopting a patient approach, hesitant to implement significant domestic stimulus measures until at least the third quarter, relying instead on an export-driven growth trajectory.
In parallel, the People's Bank of China (PBOC) is reportedly increasing its oversight of short-term money markets. Governor Pan Gongsheng indicated plans to diversify overnight reverse repo operations and optimize existing agreements to better manage liquidity. However, analysts from Citi noted that these adjustments do not signify an outright easing of monetary policy, though they still foresee a potential 10 basis-point rate cut later in the year, particularly given the sluggish domestic demand.