SHANGHAI, April 17 (Reuters) – China is expected to keep benchmark interest rates unchanged for an 11th consecutive month in April, 🏽 according to a Reuters poll, as robust first-quarter growth and rising 🏽inflation weakened arguments for additional monetary stimulus.
This week, China’s economy reported growth of 5.0%, up from 4.5% in the previous quarter, and at the top of its full-year target.
Even before the GDP figures were released, it was clear that the world’s second-largest economy was weathering the Iran war better than others, prompting major investment banks to backtrack on their calls for rate cuts. They now expect China to keep official interest rates stable this year.
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The prime lending rate (LPR), typically charged to banks’ best customers, is calculated every month after 20 designated commercial banks submit rate proposals to the People’s Bank of China.
In a Reuters poll of 20 market participants this week, all respondents predicted that at the next review on Monday, the one-year and five-year LPRs will remain stable at 3.00% and 3.50%, respectively.
In addition to the upbeat GDP numbers, China’s factory gate prices in March turned positive for the first time in more than three years, pointing to increasing pressures on import costs linked to the Middle East crisis.
“Stronger-than-expected first-quarter GDP data, combined with recent reflationary trends, may keep the People’s Bank of China on hold until conditions justify monetary policy support,” Lynn Song, ING’s chief economist for Greater China, said in a note.
China’s central bank said it will maintain an ‘appropriately loose’ monetary stance this year, implementing tools including cuts in reserve requirements and interest rates to maintain ample liquidity.
