A view of the PBC building in Beijing Photo: VCG

China's central bank on Monday kept its loan prime rates (LPRs) for January unchanged from the previous month, with the one-year LPR at 3.45 percent and the five-year LPR at 4.20 percent. 

Observers said that the unchanged rates aligned with market expectations amid China's economic recovery, and they expect targeted monetary policy moves to further lower LPRs moderately in 2024. 

The unchanged LPRs show that lending rates are still within a reasonable range as China's economy is maintaining a sound recovery, Zhou Maohua, a macroeconomic analyst at Everbright Bank, told the Global Times on Monday.

The flat benchmark lending rates also show that China is sticking to a prudent monetary policy, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times.

The People's Bank of China (PBC) last week added 995 billion yuan ($138.27 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions, with an unchanged interest rate of 2.5 percent from the previous month. 

Amid China's continuing economic recovery, experts said that challenges persist, such as insufficient demand, on top of uncertainties in overseas demand, stressing the importance of stepped-up support for the real economy and lowering the costs of consumption and investment.
 
Zhou said that China will likely smooth out monetary policy transmission and lower the LPRs through measures such as moderately reducing MLF rates and making reserve requirement ratio cuts. He expected the rate adjustments for LPRs in 2024 to be lower than last year. 

Zhou said that structural tools may play a more important role in adjustments. For example, the PBC may adopt tools such as the MLF to guide financial institutions to optimize their credit structures and enhance the balance and efficiency of credit allocations.
 
Xi Junyang said that the central bank's monetary policy will be slightly and steadily relaxed, and there is a possibility of one or even two LPR cuts in 2024.

In 2023, the one-year LPR was cut by 20 basis points and the five-year LPR was lowered by 10 basis points.

Prudent monetary policy is flexible, moderate, precise and effective, said Zou Lan, director-general of the Monetary Policy Department of China's central bank, the People's Daily reported on Monday. 

Zou stressed the importance of better utilizing the aggregate and structural functions of the nation's monetary policy tools while focusing on expanding domestic demand, boosting confidence and promoting a virtuous cycle of the economy.

Domestic monetary policy will target these three aspects to create a favorable monetary and financial environment for the nation's high-quality economic development, he said.