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China expected to keep benchmark LPR unchanged for 5th month

SHANGHAI, Sept 18 (Reuters) - China’s benchmark lending rate will likely remain steady for a fifth straight month at its September fixing on Monday after the central bank left rates on its medium-term lending facility (MLF) loans unchanged this week, a Reuters survey showed.

Thirty-one out of 35 traders and analysts in a snap Reuters poll, or nearly 90%, saw no change to either the one-year or the five-year Loan Prime Rate (LPR).

The one-year LPR stands at 3.85% after two cuts this year, while the five-year rate is at 4.65%. The LPR is a lending reference rate set monthly by 18 banks.

The People’s Bank of China (PBOC) on Tuesday kept the one-year MLF rate steady for a fifth straight month as it injected 600 billion yuan ($88.83 billion) worth of MLF loans into the banking system.

While the PBOC introduced support measures earlier this year in response to the coronavirus pandemic, including cuts in lending rates and banks’ reserve requirements, and targeted loans for virus-hit companies, the central bank has more recently held off on further easing as the economy’s recovery solidifies.

Three of the remaining respondents in the Reuters poll said they expected a marginal 5 basis point cut to both the one-year and five-year rates. One respondent forecast a 5 basis point cut to the one-year rate and no change to the five-year rate.

The MLF is one of the PBOC’s main tools for managing longer-term liquidity in the banking system, and serves as a guide for the LPR. Adjustments to MLF rates should indicate similar moves for the same month’s LPR.

The PBOC said on Tuesday that it would continue to push forward reform of the LPR and bring deposit interest rates into line with market rates. ($1 = 6.7548 Chinese yuan) (Reporting by Steven Bian, Hongwei Li, Xiangming Hou and Andrew Galbraith; Editing by Ana Nicolaci da Costa)

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