Financial News: China Keeps Key Lending Rates Unchanged

China Keeps Key Lending Rates Unchanged

02/20/2023 - 00:57:00 (RTTNews)

(RTTNews) - China left its benchmark lending rates unchanged on Monday, as widely expected, despite the economy struggling to gain traction.

The People's Bank of China retained its one-year loan prime rate, or LPR, at 3.65 percent. Likewise, the five-year LPR, the benchmark for mortgage rates, was kept unchanged at 4.30 percent.

Previously, the bank had reduced the five-year LPR rate by 15 basis points each in May and August 2022, and by 5 basis points in January 2022. The one-year LPR was last lowered in August 2022.

The LPR is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. The LPR replaced the central bank's traditional benchmark lending rate in August 2019.

Markets anticipated the central bank to hold the LPR today as the <a href=https://www.rttnews.com/3344096/china-central-bank-infuses-liquidity-into-financial-system.aspx target=_blank >medium-term lending facility</a>, or MLF, which acts as a guide to the LPR, was kept unchanged last week.

The PBoC had injected CNY 499 billion into the financial system via one-year MLF at an unchanged rate of 2.75 percent. The bank also conducted CNY 203 billion of seven-day reverse repo operation at 2.0 percent.

In January, the banks had extended a record CNY 4.9 trillion of<a href=https://www.rttnews.com/3343470/china-bank-lending-hits-record-on-corporate-loans.aspx target=_blank > loans </a>after the relaxation of pandemic related restrictions boosted demand for credit from the corporate sector.

The <a href=https://www.rttnews.com/3340326/imf-raises-global-growth-forecast-on-china-reopening.aspx target=_blank >International Monetary Fund</a> forecast China's economic growth to rise to 5.2 percent in 2023, reflecting rapidly improving mobility, but to weaken to 4.5 percent next year before settling at below 4 percent over the medium term.

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