SHANGHAI (Reuters – China maintained its benchmark interest rates for household lending and corporate loans unchanged Monday. Analysts, however, believe the case is for monetary stimulus as there are mounting risks to the economy.

One-year loan prime rates (LPRs) were held steady at 3.70%, while five-year LPRs remained stable at 4.60%.

A snap Reuters survey last week found that just half of analysts and traders expected China’s interest rates to remain unchanged.

LPR prices are loosely correlated to the People’s Bank of China’s (PBOC), medium-term loan facility (MLF rate) rate. The central bank left unchanged the MLF rate last week and shattered any expectations of a decrease. 18 banks submit monthly LPR rates, which are then set by them. They also add a premium to the MLF rate.

Most markets expect that policymakers will resume monetary ease soon in order to revive an economy hurt by the COVID-19 resurgence at home, weaker credit growth, and faltering property sectors. Additionally, there are increasing threats from the Ukraine conflict, which adds to their pressure.

Win Thin (global head of currency strategies at Brown Brothers Harriman) stated that the country will need more policy stimuli to reach its growth target of 5.5% this year.

In a note, he stated earlier that day: “We see another round rate cuts in early Q2.”

Liu He is the Chinese Vice Premier and responsible for economic policy. He called last week on the government to implement market-friendly policies in support of the economy’s slowing growth.

Liu’s remarks reinforced market expectations of monetary easing over the coming months. Many expect the PBOC will reduce the reserve requirement ratio for banks (RRR), and also lower other rates.

Citi analysts stated in a note that there is no precedent for lowering LPR without RRR or policy rate cuts.

Some analysts believe that lower interest rates will lead to capital outflows, as major economies such the United States tighten their monetary policy.

A widening gap in the policies of the two biggest economies on the planet could reduce China’s current yield advantage against the United States and cause investors to move their capital elsewhere.

The yield gap in China’s 10-year Treasury bonds has narrowed to 65 basis points. It is the lowest it has been in over three years.

China’s one-year LPR rate is used for most new and existing loans. Mortgage pricing is affected by the rate of five years.