China keeps benchmark lending rates unchanged for 4th consecutive month

SHANGHAI  – China kept its benchmark lending rates unchanged for the fourth consecutive month on Tuesday, matching expectations, but markets increasingly see further monetary easing to prop up a slowing economy.

The one-year loan prime rate (LPR) was kept at 3.65 percent, while the five-year LPR was unchanged at 4.30 percent.

In a poll of 27 market watchers, 17 or 63 percent of participants predicted no change to either rate, but expectations for monetary easing are rising.

The steady rate forecasts came after the central bank ramped up cash injections into the banking system last week, while keeping the one-year medium-term lending facility rate (MLF) unchanged for the fourth consecutive month.

The MLF rate serves as a guide to the LPR and markets mostly use the medium-term rate as a precursor to any changes to the lending benchmarks.

But market watchers said more easing is underway after senior leaders vowed to focus on stabilising the $17 trillion economy in 2023 and step up policy adjustment to ensure targets are hit, showed a statement published by the official Xinhua News agency following the annual Central Economic Work Conference.

Various officials have pledged to keep financial market liquidity sufficient and implement proactive fiscal policies to underpin the economy next year.

The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks who submit proposed rates to the central bank every month.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China last cut both in August to boost the economy.