China surprises with rate hold as economy lumbers

The news: China's central bank has surprised analysts by keeping its medium term loan rate on hold, as Beijing remains staunch with stimulus despite weak growth and deflationary pressures.

The numbers: The People's Bank of China said it would keep the rate of 95 billion yuan ($207.9 billion) of the one-year medium term facility (MTF) at 2.5%. Despite the lack of monetary easing, the PBOC did inject 89 billion yuan through reverse repurchase agreements and kept the borrowing rate at 1.8%, Reuters reports.

The context: Data published last week showed China's CPI fell for a third straight month in December, but weak growth and deflationary pressures weren't enough to sway the PBOC towards monetary easing, as a weakened yuan struggles against tepid global demand and bearish investors de-risking offshore. The yuan is 1% lower against the greenback this year and more than 10% weaker compared to the beginning of 2022.