PBoC leaves key lending rate unchanged

China’s central bank has kept a key lending rate unchanged, in line with expectations.

The People’s Bank of China left the one-year medium-term lending facility (MLF) at 2.75% on Thursday, after trimming it by 10 basis points in a surprise move in August.

The central bank also provided ¥400bn in one-year MFL liquidity, unchanged from August and also in line with expectations.

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "For all the talk of policy support, the PBoC is quietly stepping back, for now. We think this reflects the unfortunate reality of China’s liquidity trap, and the ongoing pressure on the renminbi. Monetary easing does more harm than good at the moment."

Beijing is trying to revive China's faltering economy, which continues to be hit by rolling Covid-19 lockdowns, an ongoing liquidity crisis in the property sector and slower consumer spending worldwide, while at the same time preventing significant depreciation of the renminbi.

Alongside the MLF, the PBoC trimmed two other key rates in August, the five-year and one-year loan prime rates, by 15 basis points to 4.30%, and 5 basis points to 3.65% respectively. In contrast, most central banks - including the US Federal Reserve and Bank of England - are actively raising interest rates as they look to contain surging inflation.

Some of China’s largest state-run banks, including Industrial and Commercial Bank of China and Agricultural Bank of China, also cut personal deposit rates from Thursday, according to multiple reports, for the first time since 2015.

It is thought that the co-ordinated decision by the lenders was taken following instructions from the PBoC.