China leaves lending benchmark LPR unchanged, as expected

SHANGHAI (Reuters) – China held its benchmark lending rate steady as expected on Wednesday, mirroring the central bank’s decision last week to keep borrowing costs on medium-term funding for financial institutions unchanged.

The one-year loan prime rate (LPR) remained at 3.85% from last month’s fixing, while the five-year LPR was also steady at 4.65% from previously.

A Reuters survey of traders and analysts conducted this week showed more than 70% of all participants expected China would stand pat on the benchmark lending rate in May.

Markets usually take the People’s Bank of China’s (PBOC) stance on its medium-term lending facility (MLF) rate – which serves as guide for the LPR – as an indicator for any adjustment to the lending benchmark.

The PBOC surprised markets last Friday by keeping the interest rate on MLF loans steady, even as authorities have stepped up the pace of monetary easing recently to combat the worst economic slowdown in decades.

The LPR is a lending reference rate set monthly by 18 banks.

(Reporting by Winni Zhou and Andrew Galbraith; Editing by ShriNavaratnam)