The People’s Bank of China announced key interest rates for one-year and five-year loans on Monday,
The announcement is usually on the 20th of the month, but since that day is Saturday, it will be on Monday instead.
Earlier this week, we conducted a monthly setup for the Medium-Term Lending Facility (MLF):
When the People’s Bank of China leaves the long-term lending rate unchanged, this is often, but not always, a signal that long-term lending rates will remain unchanged.
Current LPR prices are:
- 3.45% for one year
- 3.95% for five years
There will be no cuts this month (this is the prevailing expectation).
—
People’s Bank of China’s Lending Rate (LPR):
- It is the benchmark interest rate used in China, set by the People’s Bank of China every month.
- The LPR serves as a reference rate for banks when setting interest rates on (primarily new) loans issued to their customers.
- Most new and outstanding loans in China are based on the one-year mortgage interest rate, while the five-year mortgage interest rate affects mortgage pricing.
- This is calculated based on interest rates submitted daily to the People’s Bank of China by a panel of 18 selected commercial banks in China.
- The committee consists of domestic and foreign banks, with different weights assigned to each bank’s contributions based on its size and importance in China’s financial system.
- The interest rate on loans is based on the average rates offered by these banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the average rate becomes the interest rate on loans.