© Reuters. FILE PHOTO: People wearing face masks walk past the headquarters of the People’s Bank of China (PBOC), China’s central bank, on April 4, 2020.REUTERS/Wang Tingshu/File Photo/File Photo
SHANGHAI (Reuters) – China left its benchmark lending rate unchanged at a fixed monthly rate on Tuesday, in line with expectations, as authorities appeared to hold off on immediate monetary easing after the yuan’s recent rapid depreciation.
The one-year loan prime rate (LPR) remained unchanged at 3.65% and the five-year LPR was unchanged at 4.30%.
In a Reuters poll conducted this week, 21 of 28 respondents, or 75 percent of all participants, expected neither rate to change.
The stable LPR pricing came after the People’s Bank of China (PBOC) left its medium-term policy rate unchanged last week while pulling some liquidity from the banking system.
Analysts said policymakers were carefully balancing supporting a slowing economy and not creating new economic risks.
Beijing’s widening policy differences with most other major economies, which are aggressively raising interest rates to curb inflation, have put pressure on the currency and limited room for further monetary easing.
China slashed key interest rates in August as Beijing ramped up efforts to revive an economy that has been reeling from a housing crisis and a resurgence of COVID-19 cases.
But the rate cut accelerated the yuan’s devaluation. The greenback has lost about 4% against the greenback since mid-August, breaching the important psychological threshold of 7 and raising the risk of capital outflows.
The LPR is the fee that banks typically charge their best customers and is set by the 18 designated commercial banks that submit suggested interest rates to the People’s Bank of China on a monthly basis.
Most new and outstanding loans in China are based on one-year LPRs, while five-year interest rates affect the pricing of mortgages.