SHANGHAI (Reuters) -China is widely expected to leave its benchmark lending rates unchanged at a monthly fixing on Monday, a Reuters survey showed, as signs of economic resilience reduced the urgency for further monetary easing.
The loan prime rate (LPR), normally charged to banks’ best clients, is calculated each month after 20 designated commercial banks submit proposed rates to the People’s Bank of China (PBOC).
In a Reuters survey of 20 market watchers conducted this week, all respondents expected both the one-year and five-year LPRs to remain steady.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
The consensus of no immediate monetary easing comes as data this week showed China’s second-quarter gross domestic product (GDP) growth nudged slightly above market expectations, even though weak domestic demand and uncertainty around U.S. tariffs have raised economic risks.
“Although continued downward price pressures and sluggish loan demand present a solid case for further easing, the PBOC may opt to hold off until a more opportune window,” said Lynn Song, chief China economist for Greater China at ING.
“We continue to expect one more 10-basis-point rate cut and 50-basis-point reserve requirement ratio (RRR) cut before year-end.”
For now, market attention would be squarely on the Politburo meeting later this month, which is likely to shape economic policy for the rest of the year, traders and analysts said.
“With H1 real GDP growth still solid, we do not think policymakers see the immediate need to launch broad-based, significant stimulus in the near-term, including at the July Politburo meeting,” analysts at Goldman Sachs said in a note.
“Instead, we expect incremental, targeted easing to help stem the property downturn and mitigate labour market pressures in H2.”
China’s new home prices declined at the fastest pace in eight months in June from the previous month, official data showed on Tuesday, underscoring the challenges policymakers face in reviving demand even after multiple rounds of support measures.
(Reporting by Shanghai NewsroomEditing by Shri Navaratnam)
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