China set to cut benchmark lending rates after RRR cut – Reuters poll
SHANGHAI, April 19 (Reuters) – China’s commercial bank benchmark lending rates are set to be lowered on Wednesday, according to a Reuters survey, as Beijing cautiously eases monetary conditions to help an economy hit by coronavirus shutdowns in several cities.
The Lending Prime Rate (LPR), which banks normally charge their best customers, is set on the 20th of each month, when 18 designated commercial banks submit their proposed rates to the People’s Bank of China.
A large majority of 28 traders and analysts polled in a Reuters Snapshot poll on Tuesday expect a cut this month.
Of these, 11, or 39% of all respondents, predicted a marginal reduction of 5 basis points (bp) at a time in the one-year loan prime rate (LPR) CNYLPR1Y=CFXS and the five-year rate CNYLPR5Y=CFXS Wednesday. Six other participants also expect a reduction in one or other of the rates within a range of 5 to 10 basis points.
The remaining 11 respondents expected both rates to remain unchanged this month.
Most new and existing loans in China are based on the one-year LPR, which currently stands at 3.7%. The five-year rate, which influences the pricing of home loans, is 4.6%.
China last lowered the LPR in January and held rates steady for the next two months.
Expectations of imminent monetary easing were bolstered last week when the People’s Bank of China (PBOC) reduced the amount of cash banks must hold in reserves.
“The easing cycle is still ongoing, but not in the traditional format,” said Ken Cheung, chief Asian currency strategist at Mizuho Bank, who expected a 10 basis point decline in the LPR Wednesday.
The PBOC cautiously eased policy, lowering the RRR by a smaller margin than expected to provide a relatively modest injection of liquidity.
Global investment banks including Goldman Sachs said the PBOC’s restraint could reflect concerns over inflation and policy divergence between the world’s two largest economies as the US Federal Reserve raises interest rates. ‘interest.
The policy divergence could cause money to flow out of China and weaken the yuan.
“It appears that injecting liquidity is the preferred way to support growth amid growing global inflation uncertainty and faster-than-expected Fed tightening,” said Tommy Xie, chief financial officer. research on Greater China at OCBC Bank.
The PBOC kept borrowing costs on its medium-term loan facility (MLF), which guides the LPR, stable for the third consecutive month last week.
(Reporting by Li Hongwei and Andrew Galbraith, Writing by Winni Zhou; Editing by Simon Cameron-Moore)
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