China maintained its benchmark loan prime rates, as widely expected, on Friday.
The one-year loan prime rate was maintained at 3.85 percent and the five-year loan prime rate at 4.65 percent.
The one-year and five-year loan prime rates were last lowered in April 2020. The one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points in April 2020.
Markets expected LPR rates to remain on hold as the People’s Bank of China had kept the rate on its medium-term lending facility unchanged early this month.
The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This lending rate replaced the central bank’s traditional benchmark lending rate in August 2019.
With the economy losing momentum, it won’t be long before the PBoC is guiding rates lower, Julian Evans-Pritchard, an economist at Capital Economics, said. Even so, another round of large-scale credit-led stimulus does not appear to be on the cards for now.
It is important to note that any rate declines are likely to be primarily aimed at reducing financial strains rather than supporting credit growth, the economist noted.