China cuts key interest rate 2nd month in a row

      China's central bank cut its benchmark interest rate for the second consecutive month, as expected, following a cut in the rate of its medium-term loans earlier this week and yesterday's pledge by its deputy governor the central bank would open its "monetary tool box" wider to avoid a collapse in credit.
     The People's Bank of China (PBOC) cut its one-year Loan Prime Rate (LPR) by a further 10 basis points to 3.70 percent and has now cut it 15 points in two months following a 5 point cut in December.
     It is PBOC's 7th cut in LPR since it was introduced as the benchmark rate in August 2019, with the rate now having been cut a total of 65 basis points, including two cuts in response to the COVID-19 pandemic in February and April 2020.
     PBOC today also cut LPR on loans of 5 years or more - which impacts the cost of mortgages - by 5 basis points to 4.60 percent, the first cut since April 2020.

     The cut in 1-year LPR in December 2021 was part of PBOC's four moves last year to ease its monetary policy stance as authorities seek to carefully deflate the property market without triggering a credit crunch amid slower economic growth and higher inflation. 

     In July and December last year PBOC cut the reserve requirement ratio for most financial institutions by a total of 1 percentage point and also issued 85.5 billion in low cost loans to encourage financial institutions to boost their support from small enterprises and accelerate the creation of a green financial system.

     Expectations about the cut in LPR were fueled earlier this week when PBOC on Jan. 16 cut the interest rate on 700 billion yuan of one-year medium-term lending facility (MLF) loans by 10 basis points to 2.85 percent, its first cut since April 2020.

      LPR is calculated by the major financial institutions as a spread to MLF and reflects the cost of credit by 18 banks to their best customers.

      In addition to the cut in MLF, PBOC on Jan. 16 also cut the borrowing cost of 7-day reverse repos by 10 basis points to 2.10 percent when offering 100 billion yuan in reverse repos.

     On Jan. 18 PBOC Deputy Governor Liu Guoqiang told a press briefing the central bank would roll out more policies to stabilize economic growth, front-load actions and make pre-emotive moves as it seeks to spur the economy and credit. 

     In the fourth quarter of last year China's gross domestic product slowed for the third quarter in a row to an annual rise of 4.0 percent from 4.9 percent in the third quarter, 7.9 percent in the second quarter and 18.3 percent in the first quarter.

     For 2021 China's GDP grew 8.1 percent.

     Inflation in China decelerated to 1.5 percent in December from 2.3 percent in November while producer prices decelerated to growth of 10.3 percent from 12.9 percent, with analysts saying the slowdown in inflationary pressures would give PBOC space to ease policy further.

     www.CentralBankNews.info

    

China lowers main interest rate weeks after RRR cut

     China's central bank eased its monetary policy stance for the second time this month by cutting its benchmark interest rate, the sixth time the rate was cut since it was introduced some 2-1/2 years ago.
     The People's Bank of China (PBOC) lowered its Loan Prime Rate (LPR) on 1-year loans by 5 basis points to 3.80 percent and has now lowered it 55 points since it was introduced as the bank's benchmark interest rate in August 2019.

      LPR on loans 5 years or longer, which impacts mortgages, was unchanged at 4.65 percent.

      Today's rate cut follows PBOC's 1/2 percentage point cut in the reserve requirement for most financial institutions on Dec. 6, which freed up 1.2 trillion yuan banks could use to support economic activity.

      It was PBOC's second cut in the reserve requirement this year, following a similar-sized cut in July.

      The last time PBOC lowered LPR was in April 2020 when it was cut for the second time that year in response to the outbreak of the COVID-19 pandemic.

     www.CentralBankNews.info

     

China cuts RRR 2nd time to free up 1.2T yuan

     China's central bank lowered its reserve requirement for most financial institutions for the second time this year, as expected, saying this should "support the development of the real economy and steadily bring down overall financing costs."
     The People's Bank of China (PBOC) cut the required reserve ratio (RRR) for financial institutions by another 50 basis points as of Dec. 15 and has now cut it by 1 percentage point this year following a similar cut in July.
     PBOC said the move should release 1.2 trillion yuan of liquidity, slightly more than the cut in July that released 1 trillion, and this would allow financial institutions to increase their support to the economy, especially small, medium and micro enterprises.

     It added the RRR cut will lower the cost of capital for financial institutions by around 15 billion yuan a year.

     PBOC operates three different reserve ratios depending on the type of financial institutions said today's cut doesn't apply to those institutions that already employ a 5.0 percent ratio, mainly small rural banks.
      The weighted average RRR for financial institutions will be 8.4 percent after the cut, down from 8.9 percent previously, and prior to the cut the RRR for large financial institutions was 10.5 percent.
     PBOC said it would continue to implement "a sound monetary policy," and would "keep liquidity adequate at a reasonable level, and keep the growth of money supply and the aggregate financing to the real economy (AFRE) basically in line with the nominal GDP growth.
     PBOC often uses the reserve ratio to stimulate economic activity and in 2020 the bank's first move to ease policy at the onset of the COVID-19 pandemic was to cut the ratio for large financial institutions in January after which large amounts of liquidity was injected. 

     In February and April, 2020, the  benchmark interest rate, Loan Prime Rate, was then cut.

     Today's move by PBOC comes after Premier Li Keqiang on Friday said the amount of cash banks have to keep in reserve would be cut at an appropriate time.

      At the same meeting with International Monetary Fund Managing Director Kristalina Georgieva, Li also said China would increase its support for the real economy, especially for small and medium-sized companies.

     www.CentralBankNews.info

China cuts RRR for all banks 50 bps, frees up 1T yuan

     China's central bank lowered its reserve requirement for most financial institutions by half a percentage point, freeing up about 1 trillion yuan in liquidity banks can use to lend and support economic activity.

     The People's Bank of China (PBOC) said the cut in the required reserve ratio (RRR) would lower the cost of capital for financial institutions by about 13 billion yuan, adding this will help bridge a liquidity gap during a peak period when medium-term loans mature and taxes are paid in mid-to-late July.

     "The orientation of prudent monetary policy has not changed," a spokesman said in a statement on PBOC's website, adding the RRR cut is a routine operation as monetary policy returns to normal after last year's response to the COVID-19 pandemic.

      PBOC operates three different reserve ratios depending on the type of financial institution and said today's cut was comprehensive and only excluded financial institutions that already had a 5.0 percent deposit reserve ratio, which is already the lowest.

     "The purpose of this RRR cut is to optimize the capital structure of financial institutions, improve financial service capabilities, and better support the real economy," the PBOC spokesman said.

      The last time PBOC cut the reserve ratio for large banks, which includes state-owned banks such as the Industrial & Commercial Bank of China, was in May 2020, when it was lowered to 11.0 percent.

      That move on May 26, 2020 was PBOC's second cut in RRR for large banks following an earlier cut in January that year as it began loosening its monetary policy stance in the early days of the pandemic.

      Since the first cut in RRR for large financial institutions on Jan. 2, 2020, the rate has been lowered by a total of 250 basis points and now stands at 10.50 percent.

     The weighted average RRR for all financial institutions is 8.9 percent.

      Following the cut in the reserve ratio for large banks in January, PBOC in February last year injected large amounts of liquidity into the banking system to prevent a financial crises and followed this up with a cut in its benchmark lending rate, the Loan Prime Rate, on Feb. 20 and then another cut on April 20.

      PBOC's move comes the day after China's State Council, the equivalent of the cabinet, said it wanted financial institutions to reduce fees, make profits and benefit enterprises and people. It also hinted PBOC could boost lending to businesses by lowering the amount of funds banks hold in reserve.

     China's economy has been slowing in recent months and inflation in June declined to 1.1 percent from an 8-month high of 1.3 percent in May as food costs fell.

     www.CentralBankNews.info

      

This week in monetary policy: China, Paraguay, Thailand, Turkey and Egypt

     This week - December 21 through December 26 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: China, Paraguay, Thailand, Turkey and Egypt.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.
 

WEEK 52
DEC 21 - DEC 26, 2020:
CHINA	21-Dec	3.85%		0	-30	4.15%	EM
PARAGUAY	21-Dec	0.75%		0	-325	4.00%
THAILAND	23-Dec	0.50%		0	-75	1.25%	EM
TURKEY	24-Dec	15.00%	14:00	475	300	12.00%	EM
EGYPT	24-Dec	8.25%		-50	-400	12.25%	EM

   

 www.CentralBankNews.info 

China cuts reserve ratio for large banks another 150 bps

     China's central bank, the People's Bank of China (PBOC), has lowered its reserve requirement for all large financial institutions by another 150 basis points to 11.00 percent, its second cut this year following a 50-point cut in January.
     China's large financial institutions include its four big banks: the Industrial & Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China and the Bank of China.
     PBOC's cut in the reserve requirement on May 25 comes after China last week for the first time since 2002 dropped a annual target for economic growth, with Premier Li Keqiang saying the target was mainly scrapped because of the uncertainties from the global epidemic and trade, and the country's development is facing some unpredictable factors, according to news reports.
     Last year China targeted 6 to 6.5 percent annual economic growth, down from about 6.5 percent the previous year, reflecting the steady decline in growth since 14.2 percent in 2007.
    The cut to the reserve ratio came the same day Yi Gang, governor of PBOC said in a newspaper interview the country would continue to strengthen its economic policy and its efforts to lower interest rates.
     China has cut is benchmark interest rate, the Loan Prime Rate (LPR), twice this year by a total of 30 basis points and it currently stands at 3.85 percent.
     China's gross domestic product shrank 9.8 percent in the first quarter from the previous quarter and by 6.8 percent compared with the same quarter in 2019.
     In the interview Yi also said PBOC's measures since the outbreak of the coronavirus had amounted to 5.9 trillion yuan comprising cuts to reserve ratios and other lending facilities.
     In March China's state council, which is chaired by Premier Li, called on further reductions in the reserve requirement for both small and medium-sized banks, with PBOC on March 13 then lowering the reserve ratio by 50 to 100 basis points for banks that met inclusive financing targets.
     Since 2018 PBOC has cut its three different reserve ratios 12 times, releasing some 8 trillion yuan in long-term funds, of which 1.75 trillion yuan were released this year following three cuts this year, PBOC said in a statement.
     This includes the last cut to the reserve ratio of large financial institutions on Jan. 2, 2020, which freed up 800 billion yuan in funds, and the last cut to the reserve ratio of small banks that took place in two stages, each of 50 basis points, on April 15 and then May 15, freeing up 400 billion yuan.
     PBOC operates three different reserve ratios: one for large banks, which includes the state-owned banks; one for mid-sized banks, which include join-stock banks, and one for small banks, such as 4,000 rural banks, rural cooperative banks, credit cooperatives and village and town banks.
     As of May 15, the average reserve ratio of financial institutions was 9.4 percent, a decrease of 5.2 percentage points since the start of 2018
     PBOC today also announced its first liquidity injection since late March via a 7-day reverse repo operation of 10 billion yuan at an unchanged 2.20 percent, saying this was "in order to keep the liquidity adequate at a reasonable level in the banking system."

     www.CentralBankNews.info

China cuts LPR 20 bps to 3.85% in 2nd cut this year

     China's central bank lowered its benchmark interest rate for the second time this year, cutting the one-year Loan Prime Rate (LPR) by 20 basis points to 3.85 percent and the five-year LPR, used to price mortgages, by 10 basis points to 4.65 percent, as widely expected.
      On Feb. 20 the People's Bank of China (PBOC) cut LPR by 10 basis points, brining this year's total cut in LPR to 30 basis points.
     It is PBOC's fourth cut in LPR since it was introduced in August 2019 as its new benchmark lending rate and since then China's main lending rate has been cut an effective 50 basis points.
     Today's cut in LPR follows a 20 basis point cut in the 1-year medium-term-lending (MLF) rate to 2.95 percent on April 15, the lowest level since it was introduced in September 2014.
     In August last year PBOC restructured its method for calculating LPR and set it as a spread to MLF. It also designated LPR as its new benchmark lending rate.
     A few days later PBOC set LPR at 4.25 percent, 10 basis points below the previous benchmark lending rate of 4.35 percent.
      LPR was then cut 5 basis points in September 2019 and then another 5 points in November 2019, a few weeks after the MLF rate also was cut 5 points.
      On Feb. 17 this year MLF was lowered 10 basis points and then a few days later on Feb. 20 PBOC cut LPR by the same 10 basis points.
      PBOC announces LPR on the 20th of each month and in March it was left unchanged.

     www.CentralBankNews.info

This week in monetary policy: China, Turkey, Paraguay, Ukraine and Russia

    This week - April 19 through April 25 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: China, Turkey, Paraguay, Ukraine and Russia.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 17
APR 19 - APR 25, 2020:
CHINA	20-Apr	4.05%	0	-10	4.35%	EM
TURKEY	22-Apr	9.75%	-100	-225	24.00%	EM
PARAGUAY	22-Apr	3.25%	-50	-75	4.75%
UKRAINE	23-Apr	10.00%	-100	-350	17.50%	FM
RUSSIA	24-Apr	6.00%	0	-25	7.75%	EM

    www.CentralBankNews.info

China cuts key rate 10 bps in 4th cut since August 2019

     China's central bank lowered its new policy rate by 10 basis points to 4.05 percent, as expected and signaled through recent policy moves, its fourth cut in the 1-year Loan Prime Rate (LPR) since August 2019.
     The 5-year LPR, used as a benchmark to price mortgages, was cut 5 basis points to 4.75 percent, according to a brief statement on its website.
      Since August last year, when People's Bank of China (PBOC) designated LPR as its new benchmark lending rate, it has been cut by an effective 30 basis points.
     Although PBOC cut its key rate today, it did not conduct any reverse repo operations for the second day in a row, adding "liquidity is reasonable and adequate in the current banking system."
     On Feb. 19 PBOC said short-term liquidity that had been injected into the market after the Spring Festival - this year on Jan. 25 - had been soaked up with the maturing of reverse repos.
     China's central bank, along with the government, have been tackling the outbreak of the coronavirus, or COVID-19 as it is officially called, since Feb. 4 when PBOC first began injecting liquidity into the banking system and cutting rates on its short-term reverse repurchase facilities to support economic activity that has been hit hard by quarantines and shutdowns of major parts of the economy.
     Initially PBOC injected 1.2 trillion through 7-day and 14-day reverse repo operations at a rate that was 10 basis point below the previous rate from November 2019.
     Then PBOC launched a 300 billion yuan lending program to provide low-cost loans to companies involved in fighting and affected by the virus, with the government subsidizing half of companies' interest payments to ensure actual financing costs of less than 1.6 percent.
     On Monday PBOC lowered its 1-year medium-term-lending (MLF) lending facility by the same 10 basis points to 3.15 percent, foreshadowing today's cut in LPR.
     In August 2019, when PBOC designated LPR it as its new benchmark lending rate, it also rejigged its system for deriving LPR and set is as a spread to MLF.
     Days after announcing its new method for calculating LPR last year, PBOC set it at 4.25 percent, 6 basis points below the old LPR and 10 points below the previous benchmark lending rate of 4.35 percent.
     LPR was cut a further 5 basis points in September 2019 and then another 5 points in November, a few weeks after the MLF rate also was cut 5 points.
     PBOC announces LPR on the 20th of each month and it was then maintained in both December and January when the MLF rate was also maintained.
     PBOC has effectively lowered its policy rate by 30 basis points since August 2019 while LPR has technically been lowered by 26 points.

    www.CentralBankNews.info

 

This week in monetary policy: Turkey, Zambia, Namibia, Jamaica, China, Indonesia & Egypt

    This week - February 16 through February 22 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Turkey, Zambia, Namibia, Jamaica, China, Indonesia and Egypt.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 8
FEB 16 - FEB 22, 2020:
TURKEY	19-Feb	11.25%	-75	-75	24.00%	EM
ZAMBIA	19-Feb	11.50%	0	0	9.75%
NAMIBIA	19-Feb	6.50%	0	0	6.75%
JAMAICA	19-Feb	0.50%	0	0	1.50%
CHINA 1)	20-Feb	4.15%	0	0	4.35%	EM
INDONESIA	20-Feb	5.00%	0	0	6.00%	EM
EGYPT	20-Feb	12.25%	0	0	15.75%	EM
1) As of Aug. 17, 2019 Loan Prime Rate is benchmark

    www.CentralBankNews.info

China maintains LPR at 4.15% for 2nd month

    China's central bank left its new benchmark interest rate, the one-year Loan Prime Rate (LPR), steady at 4.15 percent for the second month in a row as expected after the rate on the medium-term lending facility (MLF) was maintained on Jan. 14.
     The People's Bank of China (PBOC) also kept the rate on the 5-year LPR, used to price mortgages, at 4.80 percent.
      After reforming its method for calculating LPR and designating it as its new benchmark rate for all loans on August 17, 2019, PBOC set it as 4.25 percent on Aug. 20, 6 basis points below the old LPR and 10 basis points below the previous benchmark lending rate.
      LPR was then cut a further 5 basis points in September and November last year for a total effective easing of 20 points in the benchmark lending rate since August.
      Under the revised method for calculating the benchmark lending rate, LPR is expressed as a spread to the rate on MLF, which last week was maintained at 3.25 percent.

     www.CentralBankNews.info

   

This week in monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, ECB, Paraguay & Nigeria

    This week - January 19 through January 25 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: China, Japan, Malaysia, Canada, Norway, Indonesia, the euro area, Paraguay and Nigeria.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 4
JAN 19- JAN 25, 2020:
CHINA	20-Jan	4.15%	0	0	4.35%	EM
JAPAN	21-Jan	-0.10%	0	0	-0.10%	DM
MALAYSIA	22-Jan	3.00%	0	0	3.25%	EM
CANADA	22-Jan	1.75%	0	0	1.75%	DM
NORWAY	23-Jan	1.50%	0	0	0.75%	DM
INDONESIA	23-Jan	5.00%	0	0	6.00%	EM
EURO AREA	23-Jan	0.00%	0	0	0.00%	DM
PARAGUAY	23-Jan	4.00%	0	0	5.25%
NIGERIA	24-Jan	13.50%	0	0	14.00%	FM

    www.CentralBankNews.info

China frees up 800 billion yuan by cutting RRR 50 bps

    China's central bank lived up to expectations and lowered its reserve requirement ratio for large banks by another 50 basis points, freeing up 800 billion yuan in funds in a move the bank described as "a countercyclical adjustment" that increases the source of funds for financial institutions to directly support the real economy.
     The People's Bank of China (PBOC) cut the ratio for large financial institutions to 12.50 percent, it's seventh cut in that ratio since April 2018 when it lowered it for the first time since 2016 from 17.0 percent.
      Today's cut in the reserve requirement, which takes effect Jan. 6, comes after Premier Li Keqiang on Dec. 23 said the government was studying further cuts in reserve requirements, among other measures, to lower borrowing costs for small businesses, cementing expectations that PBOC will continue its easing cycle in 2020.
      PBOC said on its website the cut in the ratio would lower banks' overall cost of funds by around 15 billion yuan annually, and small and medium-sized banks along with rural institutions would receive over 120 billion yuan of long-term funds to help local businesses.
      PBOC added the cut "is by no means an indiscriminate stimulus measure" but helps offset changes in the run-up to the Spring Festival, or Long Lunar holidays, later this month when demand for cash typically rises.
      It added such countercyclical adjustments of monetary policy are "appropriate and sound," and the monetary policy stance remains unchanged.
      The cut in the reserve requirement comes days after the PBOC told financial institutions to use the Loan Prime Rate (LPR), which is already used to price 90 percent of new loans, to price all new loans beginning this month and convert existing loans to LPR from March to August.
       Last August PBOC reformed its system for setting LPR and designated it as the new benchmark rate for all loans. Initially LPR was set at 4.25 percent, 10 percent below the old benchmark lending rate at 4.35 percent, and 6 points below the LPR that had been unchanged since October 2013.
      Under the new mechanism, which is based on the rate that 18 institutions offer their best customers, LPR is published on the 20th of ever month and the 1-year LPR was then lowered by 5 basis points in September and then another 5 points in November to its current rate of 4.15 percent.

    www.CentralBankNews.info

   

China leaves benchmark LPR rate steady at 4.15 percent

    China's central bank left its new policy rate steady at 4.15 percent following three cuts since the one-year Loan Prime Rate (LPR) was designated as the benchmark lending rate in August.
    The People's Bank of China (PBOC) also left the 5-year LPR rate, used to price home mortgages, at 4.80 percent in a release on its website.
     The decision comes two days after the interest rate on 14-day reverse repurchase agreements was lowered by 5 basis points to 2.65 percent while the 7-day rate, which was cut was 5 points in November for the first time in more than four years, was left unchanged at 2.50 percent.

    www.CentralBankNews.info

China cuts new benchmark LPR rate 3rd time

    China's central bank lowered its one-year Loan Prime Rate (LPR) by another 5 basis points to 4.15 percent, the third cut since it was designated as the new benchmark lending rate in August.
     The People's Bank of China (PBOC) also lowered the five-year LPR by 5 basis points, used to price mortgages, to 4.80 percent, the first cut in this tenor since August. 
      The rate cut was widely anticipated as it comes on the heels of cuts to two other lending rates earlier this month and confirms PBOC's concerted effort to lower the cost of financing throughout the banking system and boost economic activity.
     On Aug. 17 PBOC reformed its mechanism for calculating LPR to improve the transmission of its policy decisions to the economy and on Aug. 20 it announced LPR for the first time under this new framework, setting it at 4.25 percent.
     This was 6 basis points below the old LPR, which had been unchanged since October 2013, and 10 basis points below the previous benchmark lending rate.
     Under the new policy, LPR will be announced on the 20th of each month and on Sept. 20 LPR was cut by another 5 basis points to 4.20 percent while on Oct. 20 it was unchanged.
     LPR has now been cut by 16 basis points since it was designated the new benchmark lending rate, with today's cut following a 5-basis-point cut in the 7-day reverse repo rate to 2.50 percent on Nov. 18 and a 5-basis-point cut to 3.25 percent for the medium-term lending facility (MLF) on Nov. 5.
      Today PBOC said it didn't conduct any reverse repurchase operations on Nov. 20 "due to reasonably adequate liquidity" in the banking system. 
     China's economy has been slowing for the last six quarters, with annual growth in gross domestic product slowing to 6.0 percent in the third quarter from 6.2 percent in the second quarter and 6.4 percent in the first quarter of this year.
     Growth in the third quarter was the weakest since the first quarter of 1992 but PBOC has been steadily loosening its monetary policy stance this year by lowering reserve requirements and cutting interest rates to ensure economic activity doesn't contract further.
     Most recently, PBOC Governor Yi Gang on Nov. 19 said credit support to the economy would be stepped up and lending rates would be pushed lower.
     In his meeting with representatives from commercial banks, Yi also urged them to refer to LPR when issuing new loans.
     Meanwhile, inflation jumped to a 2019-high of 3.8 percent in October, the highest since January 2012, from 3.0 percent in September due to a surge in pork prices from an outbreak of swine fever.

     www.CentralBankNews.info

China cuts 7-day reverse repo rate 2 days before LPR

     For the second time in less than two weeks, China lowered one of its lending rates by 5 basis points, only two days before it publishes the rate on its new benchmark lending rate, the Loan Prime Rate (LPR).
    The People's Bank of China (PBOC) lowered its 7-day reverse repurchase rate on 180 billion yuan in liquidity to 2.50 percent from 2.55 percent, the first reduction since October 2015.
    This cut follows a similar-sized 5 basis point cut in the longer-term Medium-Term Lending (MFL) to 3.25 percent on Nov. 5.
    In recent years PBOC has been revamping its entire system for setting interest rates and on Aug. 17 it designated LPR as a benchmark lending rate, with the rate linked to MFL.
     As part of that move, it changed the method for calculating LPR and now bases it on prices from 18 banks, including two foreign institutions, instead of 10 banks, with the banks required to link their LPR quotes to MFL.
      LPR will be published by PBOC on the 20th of each month and on Aug. 20 the 1-year LPR was set at 4.25 percent, 10 basis points below the previous benchmark lending rate, and the 5-year LPR at 4.95 percent.
     On Aug. 20 LPR was then set at 4.20 percent, down 5 basis points, while the 5-year LPR was unchanged at 4.85 percent.

    www.CentralBankNews.info

     

China maintains LPR at 4.20% and 5-yr rate at 4.85%

    China's central bank left its new benchmark interest rate, the Loan Prime Rate (LPR), steady at 4.20 percent from September and the 5-year rate unchanged at 4.85 percent.
     In August the People's Bank of China (PBOC) reformed its method for setting LPR to improve the transmission of its monetary policy and lower the cost of financing, making LPR the pricing benchmark for all types of loans by commercial lenders instead of its lending rate.

    LPR, which is linked to PBOC's medium-term lending facility (MLF), is the average of prices submitted by 18 banks, and currently comprises two varieties, a 1 year and a 5 year. 
     LPR is published on the 20th of each month, and if this falls on a weekend or holiday, LPR is published the following day.

     On Aug. 20 LPR was published for the first time since the reform and set at 4.25 percent, 6 basis points below the 4.31 percent it had been since it was first introduced in October 2013, and 10 points below the lending rate of 4.35 percent. The 5-year LPR was set at 4.85 percent.

    On Sept. 19 LPR was published for the second time at 4.20 percent for a decline of 5 basis points.

    Earlier today Yi Gang, PBOC governor, said in Washington DC that China would continue to pursue a prudent monetary policy and recent policy measures, such as three cuts to the reserve requirements for banks and the market-based reform on interest rates, had achieved desired results.

     This includes stable growth of money supply and credit and low market interest rates, and the transmission mechanism for monetary policy will be improved further to reduce firms' funding cost and promote high-quality economic growth.

    www.CentralBankNews.info