SHANGHAI, Jan 19 (Reuters) – China’s benchmark lending rate is unlikely to change at the first monthly settlement of the year on Wednesday, stable for the ninth straight month, as the economy recovers from coronavirus panic.
Twenty-six traders and analysts, or 87% of the 30 participants, in a Reuters poll conducted this week did not predict any change in the second one-year loan rate (LPR) or the five-year tenor.
The other four respondents expected an increase in the LPR this month, with one predicting a 5 point rise on both levels.
The last one-year LPR was at 3.85% after 30 basis points of rate cuts last year, while the five-year rate stood at 4.65% after 15 bps of cuts in 2020.
China’s economy picked up pace in the fourth quarter, data showed Monday, with growth expected and expected to expand further this year even as global pandemic declines.
“We expect credit crunch and fiscal consolidation in 2021, but not the rise in policy rates,” said Li Wei, a senior economist in China at Standard Chartered in Shanghai.
“The People’s Bank of China (PBOC) is likely to maintain a somewhat invisible bias near term, due to uncertainty surrounding an uneven economic recovery, a new COVID outbreak- 19 and CNY appreciation weight. ”
Strong market expectations for a stable LPR settlement also came in January as the PBOC kept the cost of borrowing on medium-term loans unchanged for nine consecutive months.
China’s central bank made a small clean drain through the operation of a medium-term loan (MLF) facility in the banking system on Friday and kept rates on the facility unchanged, a move which investors say is a recommendation shift to a strict bias in monetary policy.
The MLF, one of PBOC’s key tools in long-term liquidity management in the banking system, is a guide for the LPR.
The LPR is a loan reference rate set monthly by 18 banks.
All 30 responses in the survey were collected from selected participants on a private messaging platform. (Reporting by Reuters China-based revenue team; Editing by Jacqueline Wong)