SHANGHAI/SINGAPORE (Reuters) – China left benchmark lending rates unchanged at a monthly fixing on Monday, in line with market expectations.
WHY IT’S IMPORTANT
The steady monthly LPR fixings come after China announced “historic” steps last week to stabilise its crisis-hit property sector, with the central bank facilitating 1 trillion yuan in extra funding and easing mortgage rules, in an attempt to revive housing demand.
The property rescue plan effectively reduced the urgency to further cut benchmark lending rates, at a time aggressive monetary easing could pile additional pressure on the weakening currency.
BY THE NUMBERS
The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 3.95%.
In a Reuters survey of 33 market participants conducted last week, 27, or 82% of all respondents, expected both rates to stay unchanged.
CONTEXT
China will cut interest rates of mortgage loans and down-payment ratios for homebuyers to boost lacklustre property demand, according to statements released by the central bank on Friday.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
The five-year LPR was lowered by a decent 25-basis-point in February to support the housing market.
China’s central bank left a key interbank interest rate unchanged when rolling over maturing medium-term loans last week, and drained some cash from the banking system through the bond instrument.
New bank lending in China fell more than expected in April from the previous month while broad credit growth hit a record low, official central bank data showed.
KEY QUOTES
“Given the strength of the recent supportive policy rollout, the odds of further monetary policy easing in the coming months to support these efforts have risen,” economists at ING said in a note.
They expect one or two cuts to the LPR this year, along with a further reserve requirement ratio (RRR) cut.
(Reporting by Winni Zhou and Tom Westbrook; Editing by Sam Holmes)
Comments