China holds benchmark lending rates steady as Fed signals fewer cuts ahead

China kept its key benchmark interest rates unchanged on Friday, as Beijing faces the challenge of boosting economic growth while supporting the weakening yuan.

The People’s Bank of China said it would stabilize the one-year prime lending rate at 3.1%, with the five-year LPR at 3.6%. The 1-year LPR affects businesses and most household loans, while the 5-year LPR serves as a benchmark for mortgage rates. The measure was expected according to a Reuters poll of 27 economists.

The rate decision came after a widely expected 25 basis point increase. rate cut for him US Federal Reserve On Wednesday. The Federal Reserve also indicated it will only cut interest rates twice in 2025, down from the four cuts in the projection at its September meeting.

Analysts saying The Federal Reserve’s revised outlook on future rate cuts is unlikely to have much influence on the trajectory of monetary policy easing by China’s central bank, although it could put pressure on the Chinese yuan.

It appears the People’s Bank of China is not intervening to defend the yuan, Farzin Azarm, managing director of equity trading at Mizuho Americas, told CNBC’s “Street Signs Asia” program on Friday.

“But really, what’s the point? … I think at this point, it’s really a function of what rates are doing. I think it’s really a function of what the curve is doing in the US. And I think the central bank is letting things develop, to be completely honest with you,” Azarm said.

Earlier this month, senior Chinese officials pledged in Main meetings to set the economic agenda. intensify monetary easing measures, including the implementation of interest rate reductions, to shore up the weakened economy.

The People’s Bank of China maintained the LPR for one and five years unchanged in November, after a Widely expected 25 basis point cut in October. The central banthat had surprised the markets reducing the main interest rates on short and long-term loans in July.

Major investment banks and research firms predict the The Chinese yuan would weaken further next year, in anticipation of President-elect Donald Trump following through on his tariff threats.

Despite a flurry of stimulus measures since late September, China’s latest economic data showed the country is still grappling with entrenched deflation, amid tepid consumer demand and a prolonged property market slump.

The Fed’s easing cycle going forward will create “some room for the People’s Bank of China to follow up,” Yan Wang, chief emerging markets and China strategist at Alpine Macro, told CNBC.Asia Street Signs” on Thursday, while highlighting that fiscal easing will play a more critical role in boosting the Chinese economy next year.

In a note sent to CNBC on Friday, Wang said he believed the People’s Bank of China should continue cutting rates to ease deflationary pressure on the yuan against other currencies.

“Meanwhile, the Chinese government has greater fiscal flexibility and is likely to rely more on fiscal measures to stimulate growth,” he added.

— CNBC’s Dylan Butts contributed to this report.