SHANGHAI (Reuters) – China is expected to keep its benchmark lending rate unchanged for a fifth straight month in January, a Reuters poll showed, even though analysts see a rise in interest rates after the central bank pledged steps to boost the COVID-ravaged economy. The economy is likely to cut interest rates next month.
With the Golden Week holiday looming, PBoC’s decision this week to keep policy rates unchanged and the new mortgage rate mechanism making loan prime rate (LPR) cuts) unlikely on Friday.
“The upcoming LPR announcement, on the last business day before the Lunar New Year holiday, may not be the best time to do so,” Mark Williams, chief Asia economist at Capital Economics, wrote in Instructions to customers. “We think next month is more likely.”
A Reuters poll of 65 market watchers this week showed 21 or 65% There is no change in the forecast benchmark LPRs, which are used as a pricing reference for bank loans.
The one-year LPR is currently 3.65% and the five-year LPR is 4.33 %. The last time China lowered the LPR was in August.
Eleven respondents forecast a cut in the five-year LPR, with the one-year term unchanged. Only one respondent predicted a one-year LPR cut.
China’s economy grew just 3% in 2022, well below official targets, but the government’s abrupt end to its zero-COVID policy sparked hopes of a strong recovery.
Analysts also pointed out that after China this month, the urgency to implement a reduction in the five-year LPR (mortgage reference rate) has been reduced to establish a dynamic adjustment mechanism for first-time home buyer mortgage interest rates.
The mechanism, designed to boost the struggling real estate sector, allows cities to lower or cancel minimum interest rates on mortgages imposed by the People’s Bank of China in an effort to stop consecutive price increases month fell.
LPR is calculated after the designated commercial bank submits its quotation to the National Interbank Funding Center under the People’s Bank of China every month 18 of.