Encouraged by last week’s positive economic data, PBOC keeps the lending rates as they were

Encouraged by last week’s positive economic data, PBOC keeps the lending rates as they were

A large number of infections has overshadowed the bank's decision.

The week starts with a decision from the People's Bank of China (PBOC). In a statement released today, the bank has decided to keep the lending rate as it is, marking the third consecutive month of steadiness.

The decision met the specialists’ expectation, and is considered a good sign, as the economy starts to recover from the slump that it was driven into by the pandemic. Official data from last week showed that the country's GDP grew by 3.2% in the past quarter, exceeding the 2.5% expected. The medium-term lending facility (MLF) was also kept the same, at 2.95%.

Besides the loan prime rate (LPR) kept at 3.85%, the five-year LPR holds its mark at 4.65%. Also, in an effort to bring more long-term funds into the market, the regulators raised the limit at 45% on how much insurers can invest in equity assets.

Given the current environment, policymakers are starting to leave behind emergency monetary easing and began to focus on targeted schemes to help specific areas of the economy. In their opinion, too much stimulus could bring more debt and higher financial risks.

Though the bank met analysts’ expectations, the market wasn’t impressed. HongKong45 lost 0.38%. In part, the decrease can be due to the increase in the number of infections. Over the weekend, more than 100 new cases have been reported. Moreover, restrictions are starting to be enforced again. As of Sunday, non-essential civil workers are to work from home. Various venues will be closed for another week, while restaurants must provide takeaway services after 6 pm.

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Sources: cnbc.com, reuters.com

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