© Reuters.
By Ambar Warrick
Investing.com– The People’s Bank of China kept its key lending rates unchanged for a fourth consecutive month on Tuesday, as it struggles to maintain a balance between shoring up a COVID-stricken economy and keeping the yuan strong.
The PBoC maintained its one-year (LPR) unchanged at 3.65%, while the five-year LPR, which is used to determine mortgage rates, was maintained at 4.30%.
The LPR is used as a benchmark by private banks for offering loans, and is determined by the PBoC based on submissions from 18 designated commercial banks.
Tuesday’s move shows that despite worsening economic conditions in China, the PBoC is trying to curb further depreciation in the yuan. An unexpected cut in the LPR earlier this year pushed the currency to a 13-year low from which it struggled to recover.
The fell 0.1% to 6.9830 against the dollar, while the was flat at 6.9837 to the dollar.
Both short-term and long-term rates are at historic lows, with the PBoC moving to shore up liquidity conditions in a flailing economy. China is grappling with an unprecedented spike in COVID-19 infections after the lifting of several lockdown and movement curbs earlier this month.
A lower five-year rate was also aimed at benefiting the country’s beleaguered real estate sector.
Still, China’s reversal of its strict zero-COVID policy is expected to spur an economic recovery in 2023, as more parts of the country re-emerge from strict movement restrictions.
Chinese officials have also vowed to shore up economic growth with more spending measures. The country’s decision to relax its anti-COVID measures was driven by a mix of public unrest and slowing economic growth.
But given the high rate of infection in the country, analysts have warned that the near-term outlook for the Chinese economy remains dire. Rising cases may also delay the lifting of broader anti-COVID measures.
