China keeps key lending rate unchanged after surprise cut in July By Investing.com

Investing.com– The People’s Bank of China kept its benchmark lending rate unchanged on Tuesday after a surprise cut in July, as Beijing maintained ultra-loose monetary policies to support economic growth.

The PBOC kept its one-year at 3.35% as expected, while the five-year, which is used to determine mortgage prices, was held at 3.85%.

The central bank unexpectedly cut both rates by around 10 basis points in July, the move coming amid a raft of measures to support local economic growth.

The LPR is determined by the PBOC based on the considerations of 18 designated commercial banks and is used as a reference benchmark for lending rates in the country. The five-year rate is closely linked to China’s housing market, which is facing nearly four years of slowing sales and a widespread cash crunch.

While China’s consumer inflation rose slightly in July, other indicators – notably credit activity and industrial production – pointed to sustained economic weakness in the country.

The rate cut in July was the first such move by the PBOC in nearly a year. But the central bank has consistently kept policy loose to help spur economic recovery in China, with limited effect.

The weakness in the economy is expected to give the PBOC more impetus to cut rates further in the coming months.