Heads up for China rate setting coming up on Monday

The People’s Bank of China announces the 1- and 5-year loan prime rates on Monday,

The announcement is usually on the 20th, but since that’s Saturday it’ll be on Monday instead.

Earlier this week we had the monthly Medium-term Lending Facility (MLF) setting:

• The PBoC has kept the 1-year MLF interest rate unchanged at 2.5%, as expected

When the People’s Bank of China leaves the MLF rate unchanged its often, but not always, a signal that LPRs will remain unchanged.

Current LPR rates are:

• 3.45% for the one year
• 3.95% for the five year

Won’t be cutting this month (is the widely held expectation).

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The PBOC’s Loan Prime Rate (LPR):

• Its an interest rate benchmark used in China, set by the People’s Bank of China each month.
• The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
• Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
• Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The panel consists of both domestic and foreign banks, with different weights assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.

This article was written by Eamonn Sheridan at www.forexlive.com.