China keeps lending benchmark rate steady for second straight month

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Pedestrians walk past the People’s Bank of China headquarters in Beijing, China, on January 7, 2019.

Giulia Marchi | Bloomberg | Getty Images

China kept its lending benchmark rate steady for the second month in a row on Monday, after the central bank left borrowing costs of medium-term loans unchanged earlier this month.

The one-year loan prime rate (LPR) was unchanged at 4.15% from the previous monthly fixing. The five-year LPR also remained the same at 4.80%.

A Reuters snap survey last week showed that China’s financial markets were nearly evenly divided over whether the benchmark lending rate would be lowered this month in a further bid to support the sluggish economy or kept steady.

The mixed views came as the People’s Bank of China (PBOC) injected fresh funds via it medium-term lending facility (MLF) loans into the banking system last week but left the interest rate unchanged.

MLF, one of the PBOC’s main tools in flexibly managing longer-term liquidity in the banking system, now serves as a guide for the new LPR. The interest rate on the one-year MLF  now stands at 3.25%.

The LPR is a lending reference rate set monthly by 18 banks.

The PBOC revamped the mechanism to price LPR in August, loosely pegging it to the MLF rate.

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