By WANG Yu
The People's Bank of China has kept the Loan Prime Rate (LPR) unchanged for the one-year term at 3.45 percent, making it four months in a row. The LPR for terms of five years and above also remained stable at 4.20 percent for the sixth consecutive month.
Throughout 2023, the one-year LPR saw two reductions of 0.1 percent each in June and August, while the five-year and above LPR was lowered by 0.1 percent in June.
Analysts expected the LPR to remain unchanged in December, as the benchmark interest rate it's tied to, the Medium-term Lending Facility (MLF) rate, also stayed the same. Banks, dealing with low profits, lacked motivation to lower the LPR.
Recent data showed an increase in the cost of wholesale financing for banks in the money market, weakening the motivation to lower the LPR markup.
Looking forward, experts anticipate adjustments in the MLF next year, which may lead to changes in the LPR.
In simple terms, the LPR is a key interest rate in China and influences the cost of borrowing for individuals and businesses. The decision to keep it unchanged reflects the government's stance on monetary policy and economic conditions.
