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China kept benchmark lending rates unchanged as expected on Friday, after Beijing rolled out sweeping monetary easing measures a month earlier to support the economy.

WHY IT'S IMPORTANT

Signs of de-escalation in trade tensions between the world's two largest economies following an agreement on a trade framework in London this month reduced urgency for additional stimulus measures.

Market watchers are also of the view that Beijing might want to save some firepower due to the broader uncertainty over a range of economic and political issues between the United States and China.

BY THE NUMBERS

The one-year loan prime rate (LPR) was kept at 3.00%, while the five-year LPR was unchanged at 3.50%.

In a Reuters poll of 20 market participants conducted this week, all participants predicted no change to either of the two rates.

CONTEXT

Last month, China lowered LPRs for the first time since October, while major state banks reduced deposit rates as authorities cut borrowing costs to help buffer the economy from the impact of the Sino-U.S. trade war.

Data for May showing slowing growth in exports and credit lending, and deepening deflationary pressure, all called for more supportive measures to bolster the economy.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.

KEY QUOTES

** DBS

"Policy is expected to lean toward liquidity injections rather than additional rate cuts to protect banks' net interest margins.

"Even another moderate 20-basis-point of one-year LPR cut this year, the net interest margin of Chinese banks will fall further to 1.45% by end of this year. As such, another 50-basis-point of reserve requirement ratio (RRR) cut this year is likely, which will in turn inject 1 trillion yuan of liquidity into the system."