SHANGHAI: China is expected to leave benchmark lending rates unchanged for an 11th consecutive month in April, a Reuters survey showed, as robust first-quarter growth and a pick-up in inflation have weakened the case for additional monetary stimulus.
This week, China's economy logged 5.0% growth, picking up from 4.5% in the previous quarter, and at the top of its full-year target range.
Even before the GDP figures were released, it was evident that the world's No. 2 economy was weathering the Iran war better than others, prompting major investment banks to walk back calls for rate cuts. They now expect China to keep official interest rates steady this year.
The loan prime rate (LPR), normally charged to banks' best clients, is calculated each month after 20 designated commercial banks submit proposed rates to the People's Bank of China (PBOC).
In a Reuters survey of 20 market participants this week, all respondents predicted that at the next review on Monday, the one-year and five-year LPRs would remain steady at 3.00% and 3.50% respectively.
In addition to the upbeat GDP figures, China's factory-gate prices in March turned positive for the first time in more than three years, pointing to rising import cost pressures linked to the Middle East crisis.
"Stronger-than-expected first-quarter GDP data, combined with the recent reflationary trends, may keep the PBOC on hold until conditions warrant monetary policy support," Lynn Song, ING's chief economist for Greater China, said in a note.
Raymond Yeung, chief economist for Greater China at ANZ, noted that keeping rates steady would be "consistent with the PBOC's preference to manage conditions via structural tools rather than rate cuts while growth remains near target."
China's central bank has said it will maintain an "appropriately loose" monetary stance this year, deploying tools including cuts to reserve requirements and interest rates to keep liquidity ample. - Reuters
