The unchanged rates were widely expected after the MLF remained unchanged last week:
- People’s Bank of China sets MLF rate at 2.5% (previously 2.5%)
This is usually (not always) a reliable indicator that LPR rates will remain unchanged. This didn’t happen in February. The MLF remained unchanged in February but we obtained a sharp drop in the 5-year LPR.
- PBOC CUT ___ rate (LPR): 1 year 3.45% (before 3.45%) 5 years 3.95% (before 4.20%)
- The 1-year rate was last changed in August 2023: PBOC Loan Prime Rates (LPR) CUT: 1-year 3.45% (was 3.55%) and 5-year 4.2% (was 4.20 %)
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The prime lending rate (LPR) of the People’s Bank of China:
- This is a benchmark interest rate used in China, set monthly by the People’s Bank of China.
- The LPR serves as a reference rate for banks when determining interest rates for (mainly new) loans granted to their customers.
- Most new and existing loans in China are based on the one-year LPR, while the five-year rate influences mortgage pricing.
- It is calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
- The panel is composed of domestic and foreign banks, with different weightings assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
- The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked and the median rate becomes the LPR.
No breaks today!
This article was written by Eamonn Sheridan at www.forexlive.com.
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