The loan prime rate (LPR), which banks usually charge their best customers, is set on the 20th of each month when 18 designated commercial banks submit interest rate proposals to the People’s Bank of China (PBOC).
Twenty-two of 24 people polled, or about 92%, in the Reuters Snapshot poll foresee no change in the one-year LPR or five-year maturity.
The other two expected a marginal rate cut five years after the government introduced a raft of support measures in recent weeks to support the struggling property sector.
Most new and outstanding loans in China are based on the one-year LPR, which is 3.65%. The five-year interest rate influences mortgage pricing and is currently at 4.30%. China most recently reduced the LPR in August to help revive the economy.
“LPRs are likely to remain unchanged this month unless economic data continues to disappoint,” said a dealer at a brokerage.
China delayed the release of economic indicators expected this week, including third-quarter gross domestic product data due on Tuesday, as the Communist Party Congress gets underway.
Lending data beat expectations in September, reducing the need for a rate cut, analysts and traders said.
They note that the weaker yuan has also limited monetary policy room for maneuver, as increased policy divergence with other major economies that are aggressively raising interest rates could fuel exit risks.
The borrowing cost of the Medium Term Loan Facility (MLF) serves as a guide to the LPR, and markets generally use the medium term rate as a precursor to any changes in the borrowing benchmark.
According to traders and analysts, market consensus was for a stable one-year LPR because the PBOC left the interest rate on its medium-term loans unchanged this week.
“We cannot rule out a further reduction in five-year LPRs of 15 basis points given recent efforts to support the housing market,” Maybank analysts said in a note, adding that the one-year LPR is likely to decline. Follow the MLF rate unchanged.