China loan rate unchanged despite speculation of further policy easing to support economic growth
- The loan prime rate (LPR) has been seen as China’s de facto benchmark funding cost since a reform in 2019 and is released on the 20th of each month
- While the rate is technically decided by a group of 18 banks, the cost is widely regarded to be an indicator for Beijing’s preference on loan rates
Banks in China kept the benchmark loan rate unchanged in July for the 15th straight month, indicating that the central bank is continuing to keep policy stable despite a recent surprise move to add liquidity to the financial system.
The one-year loan prime rate (LPR) was kept at 3.85 per cent, the same level it has been since April 2020, according to a release from the People’s Bank of China (PBOC) on Tuesday.
That followed statements from the central bank that the liquidity added last week did not represent a change of policy, disappointing some in the market who had hoped for more stimulus.
[In the second half of this year] we expect the PBOC to maintain a neutral monetary policy stance and keep benchmark interest rates unchanged as growth rates slow towards its long-term potential
The second-quarter data suggests Beijing can comfortably meet its growth target of more than 6 per cent for the year, even with high commodity prices making things more difficult for many firms.