The benchmark lending rate was kept steady by China for the 3rd straight month, which matched the expectations of the market raising hopes that the world’s 2nd largest economy was steadily and surely coming out of the Coronavirus impacts. The one-year LPR or Loan Prime Rate was kept static at 3.85%, and the five-year LPR was kept fixed at 4.65%. For those who are not aware, it is essential to note that most of the new and outstanding loans are based on the LPR, and the five-year rate influences the mortgage prices.
A recent survey by Reuters has revealed that thirty-four out of the thirty-six participants expected no real adjustment to the LPR after the People’s Bank of China kept the borrowing cost unchanged. The interest rate on the one-year Medium-Term Lending Facility loans to the financial institutions also remained at 2.95% for three consecutive months.
In light of the steadily improving economic data, analysts and economists have observed that policymakers have started to shift towards those parts of the economy that are still in trouble. Policymakers are afraid that too much stimulus can bring in an environment of debts and financial risks.
The official economic data has revealed that China’s economy is growing at a rate of 3.2% in the 2nd quarter, which is much better than 2.5% initially expected by the analysts. This sudden economic surge has been attributed to the easing of the stringent lockdown conditions, and the increased stimulus offered by the policymakers after a devastating contraction caused by the virus early in the year.
