© Reuters. FILE PHOTO: The headquarters of the People’s Bank of China, the central bank, in Beijing, China, February 3, 2020. REUTERS/Jason Lee
SHANGHAI (Reuters) – China kept its lending rates unchanged for a third straight month on Monday, as the weakening yuan and persistent outflows continued to prevent Beijing from reducing stimulus payments.
As expected, the one-year interest rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%.
In a Reuters poll of 22 market observers conducted last week, all respondents predicted no change in the one-year LPR. However, five participants expected a reduction in the five-year LPR.
LPR’s steady fix came after the People’s Bank of China (PBOC) eased its long-term lending rate slightly last week and kept interest rates on hold for a third straight month, signaling that policymakers remain wary of adding to the yuan’s weakness by cutting interest rates. .
The average price, which is called the average rental price, serves as a guide for the LPR adjustment.
Meanwhile, widening policy differences with other major economies, especially the United States, could increase the flow of money. The latest data showed that foreign investors sold China’s offshore bonds for the ninth straight month in October, the longest such outflow.
The yuan has lost more than 10% against the dollar so far this year and appears to be at its lowest annual rate since 1994.
The LPR, which banks usually pay their best customers, is established by 18 selected banks that submit their target rates to the PBOC every month.
New and outstanding loans in China are based on the one-year LPR, while the five-year rates affect housing prices. China last cut off all LPRs in August to boost the economy.
