PBoC keeps one-year and five-year loan prime rates unchanged at 3% and 3.5%.

PBoC keeps one-year and five-year loan prime rates unchanged at 3% and 3.5%.

SHANGHAI (Reuters) - The People's Bank of China (PBoC) has maintained its benchmark lending rates unchanged at the monthly fixing on Friday, as per a Reuters survey. The one-year and five-year loan prime rates (LPRs) remain at 3% and 3.5%, respectively.

The decision comes after Beijing implemented sweeping monetary easing measures last month to support the economy, which has been impacted by the ongoing Sino-U.S. trade war. The framework agreement between Washington and Beijing on tariff rates has bolstered market optimism, reducing the urgency for further easing measures.

The LPRs, calculated based on submissions from 20 designated commercial banks, are crucial for setting interest rates on new and outstanding loans in China. The one-year LPR influences most new and outstanding loans, while the five-year rate impacts mortgage pricing.

Market participants expect the seven-day reverse repo rate to serve as the primary policy rate, dictating changes to the LPRs. A trader at a brokerage noted that any adjustments to the LPRs should follow changes to the seven-day reverse repo rate, with a possible reduction in the fourth quarter of this year.

Economists, such as Ho Woei Chen of UOB, predict the seven-day reverse repo rate to be reduced by 10 basis points in the fourth quarter, guiding LPRs to a similar decrease. Additionally, the prospect of a 50-basis-point cut to the reserve requirement ratio (RRR) remains in place.

The PBoC's decision to keep the LPRs unchanged reflects the ongoing trade negotiations between China and the U.S., which are expected to stabilize the economy and reduce the need for additional monetary stimulus.

References:
[1] https://ca.finance.yahoo.com/news/china-likely-keep-lending-rates-075321321.html