China keeps key loan rates unchanged as economic recovery shows progress
Beijing, China – China's one-year loan prime rate (LPR), a marketbased benchmark lending rate, came in at 3.35% Tuesday, unchanged from the previous month.
The over-five-year LPR, on which many lenders base their mortgage rates, also remained unchanged from the previous reading of 3.85%, according to the National Interbank Funding Center.
The monthly-released data is a pricing reference rate for banks and is based on rates of the People's Bank of China (PBOC)'S open market operations, which mainly refer to the rate of the medium-term lending facility (MLF).
The PBOC said in its secondquarter monetary policy report that the reference function of MLF interest rate to LPR has declined following interest rate marketization.
On July 15, China's MLF rate remained unchanged. On July 22, the central bank lowered the interest rate on seven-day reverse repos, a key short-term policy rate, from 1.8% to 1.7%. On the same day, China cut both one-year and over-five-year LPR.
The central bank's operations last month may have indicated the direction of LPR reform, according to experts.
"In the future, it could be considered to clearly designate a short-term operational interest rate of the central bank as the main policy interest rate," said Pan Gongsheng, governor of China's central bank, at the Lujiazui Forum held in Shanghai in June.
The seven-day reverse repo operation rate has essentially taken on this function. Pan noted that the interest rates of monetary policy tools of other terms can be stripped of their policy interest rate characteristics.