Chinese banks keep lending rates unchanged after PBOC’s hold
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The People’s Bank of China has kept the medium-term lending facility rate unchanged since August.
PHOTO: REUTERS
BEIJING – Chinese banks maintained their benchmark lending rates for a fourth month after the central bank kept its monetary policy settings unchanged last week.
The one-year loan prime rate (LPR) was left at 3.65 per cent, according to a statement by the People’s Bank of China (PBOC) on Tuesday.
All but one of the 18 economists surveyed by Bloomberg expected the rate to stay on hold.
The five-year rate, a reference for mortgages, was also kept at 4.3 per cent. Twelve of the 15 economists in the survey predicted the move, while the rest forecast a 10 basis-point reduction.
The LPRs are based on the interest rates that 18 banks offer their best customers and are published by the PBOC monthly. They are quoted as a spread over the central bank’s rate on its one-year policy loans, known as the medium-term lending facility (MLF).
The PBOC has kept the MLF rate unchanged since August, with the central bank expected to tread cautiously with the abrupt end to Covid-19 restrictions likely to help fuel an economic recovery in 2023 and possibly drive up inflation.
The central bank has instead injected more liquidity into the banking system through a cut to the reserve requirement ratio for banks and boosting the amount of MLF loans, helping to ease some of the recent stress in money markets.
Some analysts see more chance of a reduction in the MLF and LPR rates by early 2023 after the authorities hinted at further policy easing for the property sector and latest indicators show a weakening in the economy.
Smaller rate hikes from the US Federal Reserve will also give the PBOC more room to manoeuvre as pressure on the renminbi subsides. BLOOMBERG
