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China leaves benchmark lending rate unchanged for second straight month

China leaves benchmark lending rate unchanged for second straight month

File photo of China's yuan currency. (AFP)

SHANGHAI: China left its benchmark lending rate unchanged for the second straight month at its June fixing on Monday (Jun 22), 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 per cent from last month's fixing, while the five-year LPR was also steady at 4.65 per cent 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 per cent of all participants expected China to keep the lending benchmark unchanged this month. 

Only 20 per cent 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 per cent.

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.

Source: Reuters/ic

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