China to keep benchmark LPR lending rate unchanged for 12th month
SHANGHAI, April 19 (Reuters) – China’s benchmark rate is expected to remain unchanged for a 12th month at its April fixing on Tuesday, according to a Reuters survey.
Twenty-seven traders and analysts, or 90% of 30 participants in a Reuters poll on Monday, predicted no change in the one-year prime lending rate (LPR). CNYLPR1Y = CFXS or the five-year-old tenor CNYLPR5Y = CFXS.
The other three respondents expected a hike in the LPR this month, with two predicting a 5 basis point hike for both rates and one predicting a 5 basis point hike just for the five-year LPR.
The one-year LPR was the last at 3.85% and the five-year rate was 4.65%.
Expectations of a steady LPR fixation emerged as China posted record first-quarter economic growth of 18.3% after last year’s deep coronavirus crisis, propelled by stronger demand in the country and abroad and through continued government support for small businesses.
While growth has been strong, it has been slightly below market expectations, leaving many market participants to believe that the authorities would not make any imminent change in policy direction at this time.
“We believe that policymakers, wary of the downside risks, will remain cautious about the unwinding of the stimulus measures,” BNP Paribas economists said in a note.
Others have looked for clues to borrowing costs on medium-term loans that the People’s Bank of China (PBOC) charges financial institutions.
“We do not anticipate any changes to the LPR this month as the BPC has not adjusted the rate on its Medium Term Loan Facility (MLF) as it did prior to the last three LPR trades,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note.
The BPC injected medium-term loans into the banking system last week while keeping the interest rate unchanged. The bank hasn’t changed the rate for a year.
A separate Reuters poll of 47 economists showed China would likely maintain the one-year LPR until the end of 2021.
(Report by Reuters China Fixed Income Team, written by Winni Zhou; edited by Christian Schmollinger)
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