© Reuters. Paramilitary policemen stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China, September 30, 2022. REUTERS/Tingshu Wang/Files
SHANGHAI (Reuters) – China is expected to leave its benchmark lending rates unchanged at the monthly fixing on Monday, a Reuters poll showed, as investors believe the world’s second-biggest economy is on track to recover from COVID-19 crashes.
Some early signs of recovery seen since a run of better-than-expected economic data since Beijing’s abrupt exit from its strict zero-COVID strategy in December have undermined the urgency of imminent expansionary monetary policy.
The LPR, which banks normally charge their best customers, is calculated each month after 18 designated commercial banks submit proposed rates to the People’s Bank of China (PBOC).
In a survey of 27 market observers, 21, or 78% of all respondents, predicted no change in either the one-year or five-year LPR.
The other six respondents, however, expected a marginal interest rate reduction to the five-year LPR, while believing the one-year term would remain stable.
The strong consensus for a constant one-year LPR came as new bank lending in China rose more than expected to a record 4.9 trillion yuan ($713 billion) in January as the central bank looks to boost the recuperation.
Separately, China’s central bank increased medium-term liquidity injections by rolling over policy loans due this week, while keeping interest rates unchanged.
The Medium Term Lending Facility (MLF) rate now serves as a guide for the LPR.
“Given the economy is recovering and the PBOC left the one-year MLF rate unchanged, we predict that the chance of a change in the LPR is small,” the ING economists said in a note.
“In addition, the government has told banks to offer lower interest rates on mortgages to support the economy. This would result in banks not having enough room to reduce net interest margins.”
New home prices in China rose in January for the first time in a year as Beijing has gradually increased support for the real estate sector, which accounts for a quarter of the national economy since late last year, boosting demand .
($1 = 6.8764)