In an unexpected move, China holds back on cutting key rate

The metropolis of Shanghai, where many foreign businesses are located, entered a two-part lockdown this week as municipal authorities sought to control an outbreak in China’s worst Covid wave in two years.
Hector Retamal | Afp | Getty Images

China’s central bank kept a key interest rate unchanged on Friday in a surprise move, despite expectations for more stimulus as Beijing grapples with a Covid surge.

The People’s Bank of China said it was keeping the rate on its one-year medium-term loan unchanged at 2.85%.

The Asian giant is facing its worst Covid outbreak since the start of the pandemic in late 2019, as it locks down key cities like Shanghai.

The mass lockdowns sparked predictions that its GDP growth would fall to below the government’s target of 5.5% for this year, prompting some economists and analysts to expect a rate cut.

“The People’s Bank (PBOC) forwent the opportunity to lower its policy rates today. That’s somewhat surprising given the sharp economic downturn and recent calls from China’s leadership for monetary support,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

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