China: PBoC stays on hold amidst ongoing recovery – UOB

UOB Group’s Economist Ho Woei Chen, CFA, and Senior FX Strategist Peter Chia review the recent decision by the PBoC to leave the interest rate unchanged.

Key Quotes

“The People’s Bank of China (PBoC) kept its Loan Prime Rate (LPR) unchanged … with the 1Y LPR and the 5Y & above LPR set at 3.85% and 4.65% respectively. The decision was in line with expectation after the central bank kept its 1-year medium-term lending facility (MLF) rate unchanged at 2.95% and drained liquidity from the banking system last Friday.”

“Coronavirus resurgence that put some Chinese cities under lockdown has emerged as one of the key near-term risks, particularly with the Lunar New Year in February that typically sees mass movement of people. However, with the sustained momentum in economic recovery since 2Q20, the PBoC is not likely to add on more stimulus measures this year. Nonetheless, the downside risks may see a more cautious unwinding of its pandemic measures.”