SHANGHAI, Feb 17 (Reuters) – Most observers expect China to keep its benchmark lending rates unchanged at Monday’s monthly fixing, a Reuters poll showed, as investors believe the world’s second-biggest economy of the world is on its way to recover from the dips of COVID-19.
Some early signs of recovery seen from a series of better-than-expected economic data since Beijing’s abrupt exit from its strict zero-COVID strategy in December have undermined the urgency of an imminent loosening of monetary policy.
The Loan Prime Rate (LPR), which banks typically charge their best customers, is calculated each month after 18 designated commercial banks submit rate proposals to the People’s Bank of China (PBOC). .
In a survey of 27 market observers, 21, or 78% of all participants, predicted no change in either the one-year or five-year LPR.
The other six respondents, however, expected a marginal reduction in the five-year interest rate, while they believed that the one-year term would remain stable.
The strong consensus in favor of a stable one-year interest rate came as new bank lending in China rose more than expected to a record 4.9 trillion yuan ($713 billion) in January, in a time when the central bank is trying to fuel the recovery.
On the other hand, China’s central bank increased medium-term liquidity injections by renewing maturing credit facilities 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 People’s Bank of China has kept the MLF one-year interest rate unchanged, we expect the chances of a change in the LPR to be slim,” say the economists at ING 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 leeway to reduce interest margins.”
New home prices in China rose in January for the first time in a year, after Beijing has been gradually increasing support for the real estate sector, which accounts for a quarter of the national economy, since late last year, has boosted demand.
($1 = 6.8764 Chinese yuan)
(Reporting by Li Hongwei and Brenda Goh; Writing by Winni Zhou; Editing by Kenneth Maxwell, Editing in Spanish by José Muñoz from the Gdansk newsroom)
