A view of the People’s Bank of China headquarters, Beijing, China, September 25, 2023. /CFP

A view of the People’s Bank of China headquarters, Beijing, China, September 25, 2023. /CFP

China’s one-year loan prime rate (LPR), a market-based benchmark lending rate, remained unchanged from the previous month at 3.45 percent on Wednesday, as analysts widely expected.

The over-five-year LPR, which is used as a reference for mortgage rates, also stayed constant at 4.2 percent.

The decision to keep rates unchanged was likely due to a number of factors, including the recent cut in mortgage rates for existing home loans, which has impacted banks’ interest income, according to analysts.

In October, the interest rates on existing first-home mortgages were lowered across the board, with an average reduction of 0.72 percentage point. This inevitably impacted bank interest income, Wang Qing, chief macro analyst at Golden Credit Rating, told Chinese finance media Cailianshe.

“This means that banks are more likely to focus on asset returns and less likely to lower LPRs,” said Wang.

China’s central bank has been cutting interest rates in an effort to support economic growth. In August, it lowered the one-year LPR by 10 basis points, and in June, it lowered the over-five-year LPR by 10 basis points.

Analysts expect the central bank to continue monetary policy easing in the coming months.

Wang Tao, head of Asia economic research at UBS, predicts that the central bank will cut the medium-term lending facility (MLF) rate by 10 to 20 basis points in 2024.

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