SHANGHAI: China left its benchmark lending rate unchanged for the second straight month at its June fixing on Monday, matching market expectations, after the central bank kept borrowing costs on medium-term loans steady last week.
The one-year loan prime rate (LPR) remained at 3.85% from last month’s fixing, while the five-year LPR was also steady at 4.65% from previously.
The move in the LPR affects the price lenders charge corporates and households for loans, and the five-year rate influences the pricing of mortgages.
A Reuters survey of traders and analysts conducted last week showed more than 70% of all participants expected China to keep the lending benchmark unchanged this month. Only 20% of all respondents predicted a marginal cut to one-year LPR.
The PBOC rolled over some maturing medium-term loans last week while keeping interest rates unchanged for the second straight month in a row.
The medium-term lending facility (MLF), one of the PBOC’s main tools in managing longer-term liquidity in the banking system, serves as a guide for the new LPR. The interest rate on one-year MLF stands at 2.95%.
The LPR is a lending reference rate set monthly by 18 banks. The PBOC revamped the mechanism to price LPR in August 2019, loosely pegging it to the MLF rate. – June 22, 2020, Reuters
