China’s central bank left its benchmark lending rates unchanged for the sixth consecutive month after the official data revealed that the economic growth gained further momentum in the third quarter.
The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.
The one-year and five-year loan prime rates were last reduced in April. The one-year loan prime rate was lowered by 20 basis points and five-year rate by 10 basis points in April.
The interest rates were expected to be retained today as the rate on its medium-term lending facility or MLF, which serves as a guide for the LPR, was maintained this month.
The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank’s traditional benchmark lending rate in August 2019.
With the PBoC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next year, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said.
Chinese economic growth accelerated to 4.9 percent in the third quarter from 3.2 percent in the second quarter.
While all major global economies are forecast to shrink this year due to the coronavirus pandemic, the International Monetary Fund had upgraded China’s growth projection to 1.9 percent from 1 percent. Growth is forecast to zoom to 8.2 percent in 2021.
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