China holds lending rates steady; market sees reserve ratio cut as next move

China kept its benchmark lending rates unchanged for the ninth month in May on Monday, matching market expectations, as a weakening yuan and widening yield differentials with the United States limited the scope for any substantial monetary easing.

A raft of data over the past month or so, including April indicators last week, pointed to an economy losing momentum after the initial post-COVID bounce and lifted hopes of more easing measures.

But given capital outflow risks that could further hurt a sliding yuan, some analysts now expect the People’s Bank of China (PBOC) could lower the amount of cash banks must set aside as its next policy move.

Earlier in the day, China’s one-year loan prime rate (LPR) was kept at 3.65% and its five-year LPR was unchanged at 4.30%.

In a Reuters poll of 26 market watchers conducted last week, 23 predicted no change to the rates for this month.

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