The People's Bank of China, the Central Bank, kept its benchmark interest rate unchanged in April, as expected by the market. This marks six consecutive months of this policy, and it is interpreted that, despite economic uncertainties, recent economic indicators have exceeded expectations, leading authorities to judge that there is not an urgent need for rate cuts.
On the 21st, the People's Bank of China announced it would maintain the loan prime rates (LPR) for one-year and five-year loans at 3.1% and 3.6%, respectively. The Central Bank has kept the LPR unchanged for six months after lowering it by 0.25 percentage points each in October last year.
Although the LPR is not an official benchmark interest rate, it serves a similar role because all financial institutions in China reference the LPR for their lending practices. The one-year LPR influences general short-term loan rates, while the five-year LPR affects rates for dwellings.
This decision by the People's Bank of China came as the country released improved economic indicators this month, surpassing expectations. Earlier, there were observations that amid concerns over an ongoing real estate slump and deflation, coupled with a tariff war, the Central Bank might lower interest rates to stimulate the economy.
However, CNBC reported that "China's gross domestic product (GDP) in the first quarter grew by 5.4% compared to the previous year, and the retail sales and industrial production figures for March also exceeded economists' expectations," indicating that the Central Bank might not have lowered rates as it has the capacity to maintain the economy without rate cuts.
However, consumer prices in China remain in a deflationary phase. Last month, the consumer price index (CPI) fell by 0.1% compared to the previous year. Producer prices dropped by 2.5% in the same month, marking the largest decline since November 2024 and continuing a deflationary phase for 29 consecutive months.