China Keeps 'De Facto Benchmark Rate' LPR Steady... Adjusts Liquidity Supply Pace
China's central bank has kept the Loan Prime Rate (LPR), which serves as the 'de facto benchmark interest rate,' unchanged. This is interpreted as a move to adjust the pace of liquidity supply following last month's unexpected 'surprise cut.'
The People's Bank of China announced on the 20th that it would hold the 5-year LPR at 3.85% and the 1-year LPR at 3.35%. The central bank had maintained the 5-year LPR steady for four months from March to June and the 1-year LPR for ten months since last September, before lowering both by 0.1 percentage points (p) each last month.
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The LPR is calculated by aggregating the lending rates offered to the best customers by 18 designated banks. Since local financial institutions base their lending rates on this, it effectively functions as the benchmark interest rate in China. The 1-year rate affects general loans, while the 5-year rate impacts mortgage loans.
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