China kept benchmark lending interest rates unchanged for a fourth straight month on Tuesday, matching forecasts from market watchers who still expected monetary easing to prop up a slowing economy.
The one-year loan prime rate (LPR) was left at 3.65%, while the five-year LPR was kept at 4.30%.
The People’s Bank of China (PBOC) last week increased cash injections into the banking system and said it would keep the one-year medium-term lending facility rate (MLF) unchanged for a fourth month. Market watchers consider MLF announcements as a guide for any LPR changes.
In a subsequent Reuters poll, 17 of 27 market watchers predicted no change to the LPR, but said last week senior leaders had set goals to stabilize the $17 trillion economy in 2023 and ensure Vowed to focus on increasing policy accommodation.
Commerzbank economists said in a client note, “PBOC will guide further lowering of the LPR in the coming months, particularly the five-year LPR to support real estate and long-term business loans.”
In recent weeks, several officials have pledged to implement active fiscal policies to ensure adequate financial market liquidity and strengthen the economy next year.
Jing Zhaopeng, senior China strategist at ANZ, said with no change in rates, household spending would continue without growth in disposable income.
“When households have significantly reduced balance sheets, it becomes harder to stimulate consumption,” Xing said, referring to a meeting of policymakers last week to chart the economy’s course into 2023.
Jing said it was “little surprise” not to cut the LPR and the market will now look at any further policy measures.
The LPR, which banks typically charge their best customers, is determined by 18 designated commercial banks that submit proposed rates to the central bank every month.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences mortgage pricing. China last cut both in August to boost the economy, Business News reports.
