China set to keep lending benchmark LPR unchanged for 12th month
China’s benchmark lending rate is set to remain unchanged for a 12th month at its April fixing on Tuesday, a Reuters survey showed.
Twenty-seven traders and analysts, or 90%, of 30 participants in a Reuters poll conducted on Monday predicted no change in either the one-year Loan Prime Rate (LPR) or the five-year tenor.
The other three respondents expected a rise in the LPR this month, with two forecasting a 5 basis points rise to both rates and one predicting a 5 basis points increase only to the five-year LPR.
The one-year LPR was last at 3.85%, and the five-year rate stood at 4.65%.
Expectations for a steady LPR fixing came as China reported record economic growth in the first quarter of 18.3% from last year’s deep coronavirus slump, propelled by stronger demand at home and abroad and continued government support for smaller firms.
While the growth was strong, it was slightly below market forecasts, leaving many market participants to believe that the authorities would not make any imminent changes to the policy stance for the time being.
“We think policymakers, wary of downside risks to activity, will remain cautious with regard to the unwinding of policy stimulus,” economists at BNP Paribas said in a note.
Others looked for clues at the borrowing costs on the medium-term loans that the People’s Bank of China’s (PBOC) charges financial institutions.
“We do not expect any changes to the LPR this month given that the PBOC did not adjust the rate on its medium-term lending facility (MLF) as it did ahead of the past three LPR moves,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note.
The PBOC last week injected medium-term loans into the banking system while keeping the interest rate unchanged. The bank has not changed the rate for a year.
A separate Reuters poll of 47 economists showed that China would likely keep the one-year LPR steady until the end of 2021.
Source: Reuters (Reporting by Reuters China fixed income team, Writing by Winni Zhou; Editing by Christian Schmollinger)