China left its benchmark lending rates unchanged for the second straight month despite the economy struggling to recover from the impact of the coronavirus crisis.
The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.
The one-year and five-year loan prime rates were last reduced in April. The one-year loan prime rate was lowered by 20 basis points and five-year rate by 10 basis points in April.
The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank's traditional benchmark lending rate in August 2019.
Last week, the People's Bank of China injected CNY 200 billion funds into the financial system via medium-term lending facility at a rate of 2.95 percent, unchanged from the previous operation.
With fiscal stimulus ramping up and economic recovery well underway, the PBoC appears to see less of a need to encourage stronger private borrowing, Julian Evans-Pritchard, an economist at Capital Economics, said.
Broad credit growth still looks set to accelerate further in the coming quarters. But short-term interest rates are unlikely to decline much further, the economist noted.
Iris Pang, an ING economist said she is looking for a targeted RRR cut this week, by 0.5 percentage points for some banks on the specific requirement to use the liquidity for small and medium sized enterprises.