(Yicai Global) May 16 -- China’s central bank injected CNY125 billion (USD18 billion) of fresh funds into the financial system via one-year medium-term lending facility loans, CNY25 billion more than the amount that matured, but kept the interest rate the same, dashing market expectations that rates would be lowered.

The MLF interest rate remains at 2.75 percent, the same rate it has been for the past 10 months, the People’s Bank of China announced yesterday. The unchanged rate means that the loan prime rate, the benchmark lending rate which is pegged on the MLF loan rate, is also not likely to be revised downward this month.

As economic recovery gathers momentum, there is not a great need to lower interest rates, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating. 

There had been market expectations that rates would be trimmed after last month’s key economic indicators showed weakening demand.

Falling interest rates would put banks under more pressure, said Wen Bin, chief economist at China Minsheng Bank. Moreover, amid sluggish demand, low-interest-rate loans are not necessarily translated into more investment and production, and so implementing fiscal policy will probably have better results.

The purchasing managers’ index in the manufacturing sector fell into contraction territory for the first time this year in April, dipping 2.7 points from March to 49.2, below the benchmark of 50, according to data from the National Bureau of Statistics.

And the consumer price index, a gauge of inflation, ticked up by 0.1 point last month year on year, the lowest yearly increase since March 2021.

Editors: Dou Shicong, Kim Taylor