People’s Bank of China announced Septemberloanmarket priceRate of interest(LPR) indicates that the one-year LPR is 3.45%; The LPR for 5 years and above is 4.2%, both unchanged in line with market expectations. However, institutions’ analysis suggests that the LPR could still go lower in the future.
LPR is formed by adding points to the medium term lending facility (MLF) interest rate. On the 15th, the People’s Bank of China increased its net investment in this month’s MLF renewal, while the winning interest rate remained unchanged.
LPR showed an asymmetric interest rate cut in August, with 1-year LPR reduced by 10 basis points and 5-year and above LPR left unchanged. Since the beginning of this year, the 1-year LPR has been reduced by a cumulative 20 basis points, and the LPR of 5-year and above has been reduced by 10 basis points.
CITIC Securities chief economist Ming Ming pointed out in a research report that the 5-year LPR was “on hold” after the MLF interest rate cut in August, while the reserve requirement ratio cut in September and the state-owned bank cut deposits. Interest rates provided some room to offset the cut in long-term LPR. However, banks are currently facing greater pressure on net interest margins, especially given that the subsequent adjustment in current mortgage interest rates and localized lending will increase their operational difficulties. Commercial banks are not willing to take the initiative to reduce LPR in September. Considering the background of financial profit sharing institutions, there is still a possibility of the LPR being lower in the future.
Wang Qing, chief macro analyst of Oriental Jincheng, analyzed that the possibility of the LPR being lowered before the end of the year cannot be completely ruled out: First, it depends on the macroeconomic and housing market trends in the fourth quarter. Does, and there is still room to reduce MLF; Second, looking forward to the next period, home prices in mainland China will remain at a low level over time, which will also provide favorable conditions for further lowering of policy interest rates; Third, it is expected that regulators will mainly use stabilizationexchange ratePolicy instruments are used to respond to RMB exchange rate fluctuations, and foreign exchange market risks are controllable. Based on the above, there is still a possibility that the downward adjustment of the MLF will lead to a follow-up adjustment of the LPR in the fourth quarter.
The LPR is quoted by each quoted bank based on the open market operating interest rate (primarily referring to the medium-term credit facility interest rate) plus points, and the national interbank lending rate, to provide a pricing reference for bank loans. The calculations are done by the Centre. Currently, LPR includes two varieties: 1-year tenure and 5-year tenure or more.