China leaves key interest rate unchanged for 11th straight month as it moves to cautiously scale back economic stimulus

Name: Gloves off at top-level US-China summit in Alaska with on-camera sparring
Uploaded: 2021-03-22T11:15:14.000Z
Duration: 2 min 23 s
Description: Gloves off at top-level US-China summit in Alaska with on-camera sparring

Beijing policymakers continue to worry about excess US liquidity, putting pressure on Washington to normalise policies

Inflation worries have already caused three emerging market central banks to raise interest rates in the past week

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The PBOC has kept the one-year loan prime rate (LPR) at 3.85 per cent, while the five-year LPR remains at 4.65 per cent. Photo: Bloomberg

Orange Wang

Published: 7:15pm, 22 Mar 2021Updated: 7:15pm, 22 Mar 2021

China’s central bank kept its benchmark lending rate unchanged for the 11th straight month on Monday, in a further sign policymakers are proceeding cautiously to maintain sufficient support for the economy while gradually reducing stimulus to cut debt and defuse financial risks.

The decision by the People’s Bank of China (PBOC), which was widely expected, comes amid rising concern in domestic policymaking circles about a wave of excess liquidity from the Biden administration’s US$1.9 trillion coronavirus rescue package and promises by the Federal Reserve to keep interest rates near zero and continue buying government securities to pump cash into the market.

The aggressive US stimulus measures have already forced some emerging market central banks – including Brazil, Russia and Turkey – to raise interest rates due to rising inflation pressures.

The PBOC kept the one-year loan prime rate (LPR) at 3.85 per cent, while the five-year LPR remained at 4.65 per cent.

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Twenty-nine of 30 financial market participants in a survey conducted by Reuters last week predicted no change in either rate, which have not moved since being cut last April during the height of the coronavirus economic impact.