The Chinese central bank follows the United States to maintain stable rates while pricing threats put pressure on the yuan

Beijing, China – January 06: The popular building of the Bank of China (PBOC) is seen on January 6, 2025 in Beijing, China.

Visual China Group | Getty images

China kept its key loan rates that are unchanged on Thursday, while Beijing juggles growth and stabilizing its currency in the midst of increasing commercial friction.

The Banque Populaire de China held the loan rate at 1 year at 3.1% and the LPR at 5 years to 3.6%, where they have been a decrease in one quarter percent in October.

The rate decision follows the decision of the American federal reserve to have reference interest rates. However, Fed officials said the percentage half-point rate drops until 2025 is likely.

The LPR of China normally billed to the best customers of banks are calculated monthly according to the prices offered of the designated commercial lenders subject to the PBOC. The 1 year LPR influences companies and most households in China, while the 5 -year LPR serves as a reference for mortgage rates.

The PBOC has retained its rate of 7 days, the country's main rate of policy, standardat 1.5% since a drop in October, because the Central Bank defends the Yuan, which has dropped down to the mid -threats of higher prices.

“Political decision -makers recognize the country's robust growth momentum while remaining cautious due to future persistent pressures,” said Bruce Pang, deputy professor at Chinese University of Hong Kong, citing the risks of trade tensions, the constant political position of the Fed and Chinese banks of Chinese banks.

The Chinese economy showed a modest taking in the first two months of the year, retail sales increasing 4.0% compared to the previous year, faster than the increase of 3.7% in December. Industrial production is also higher than expectations, increasing 5.9% over the year.

Inflation data, however, highlighted the need for more political support for sustainable economic recovery. The inflation of consumer prices in February fell into a negative territory for the first time in more than a year while the deflation of the prices of producers persisted.

Beijing has increased internal consumption a higher policy priority this year to amortize the impact of an escalation of trade war abroad.

“With the stronger call to support consumption, chances are more and more than China reduces rates at the next meeting,” said Gary NG, main economist at Natixis. “If retail and house sales do not improve, especially if inflation remains low, we can see a drop in the rate as early as April,” he added.

After the announcement of the rates, the yuan has changed little, the trade at 7.2280 against the greenback while the yield on the state bonds at 10 years fell by more than 2 base points to 1.932%.

The Yuan offshore Chinese has found land in recent weeks after reaching a 16 -month hollow in January. He weakened almost 1.8% since the electoral victory of American president Donald Trump in November.

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The senior Chinese officials have undertaken to accelerate monetary easing measures this year, including interest rate reductions “at the appropriate time”, because Beijing set an ambitious growth objective of “around 5%”.

Goldman Sachs economists in a note earlier this month have maintained their forecasts for two 20-point duty reductions in the second and fourth quarter of this year. The investment bank also provides two reductions of 50 base points in the reserve needs ratio, or RRR, which determines the amount of money that banks must have as reservations, in the first and third quarter.

Earlier this month, the Governor of the PBOC, Pan Gongsheng, reiterated that the bank wanted to maintain the stability of currencies at “a reasonable and balanced level”. Preventing the yuan from weakening too quickly could be considered a sign of good will in the birth of any negotiation with Trump on a trade agreement to put a ceiling on prices.

Although the cuts do not materialize, analysts predict that all PBOC political measures are likely to depend on Trump's commercial policy movements.

Trump scored new 20% prices on Chinese imports and threatened more in early April. The new prices are considered to be exports from China, a luminous point alone in the shocking economy.

The growth of exports in the second world economy slowed down more than scheduled in January and February, while imports during the two months have dropped their strongest fall since July 2023.

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