China keeps loan benchmark LPR unchanged in July as money rates stay low

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The People’s Bank of China building in Beijing Photo: VCG

China kept its benchmark lending prime rate (LPR) unchanged in July, central bank data showed on Wednesday, with interbank rates remaining low despite U.S.-led monetary tightening.

The one-year LPR was pegged at 3.7% in July, unchanged from the previous month, while the five-year LPR remained stable at 4.45%, the People’s Bank of China (PBC) said on Wednesday. , the country’s central bank.

LPR ratings, updated monthly, are based on a weighted average of lending rates from 18 designated commercial banks.

The one-year LPR is a benchmark rate for the majority of new and existing loans in the country, while home loan pricing is based on the five-year rate.

Although some market watchers expect the benchmark lending index to trend lower, short-term money market rates hovering around low levels warrant unchanged rates for now.

For example, the overnight Shanghai Interbank Offered Rate (Shibor), an indicator of the country’s interbank market funding costs, stood at 1.27% on Wednesday, up 2.8 basis points from on the eve. The money rate reading remained at low levels, suggesting reasonably plentiful liquidity in the market, although most other major central banks, including the US Federal Reserve, continued on the path of raising interest rates. ‘interest.

In May, the PBC held the one-year rate steady at 3.7%, while cutting the five-year LPR by 15 basis points to 4.45% in May.

The May decision was the second five-year LPR cut this year, also the largest and the first asymmetric cut in the benchmark long-term lending rate on mortgages. The previous changes were in January, when the PBC cut the one-year LPR by 10 basis points from 3.8%. Meanwhile, the five-year LPR was cut 5 basis points from 4.65%, the first cut since April 2020.

world times

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