{"id":132652,"date":"2021-07-19T09:13:00","date_gmt":"2021-07-19T09:13:00","guid":{"rendered":"https:\/\/precoinnews.com\/?p=132652"},"modified":"2021-07-19T09:13:00","modified_gmt":"2021-07-19T09:13:00","slug":"china-likely-to-keep-lending-benchmark-lpr-steady-in-july-outlook-divided","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/china-likely-to-keep-lending-benchmark-lpr-steady-in-july-outlook-divided\/","title":{"rendered":"China likely to keep lending benchmark LPR steady in July, outlook divided"},"content":{"rendered":"
SHANGHAI (Reuters) – China will likely keep its benchmark lending rate unchanged at its July fixing on Tuesday, a small majority of respondents to a Reuters survey believe, but there are growing expectations for a cut after a surprise lowering of bank reserve requirements.<\/p> Eleven traders and analysts, or 52.4% of 21 participants, in the snap poll predicted no change in either the one-year Loan Prime Rate (LPR) or the five-year tenor.<\/p>\n The remaining 10 respondents expect a cut to the one-year LPR. Nine participants forecast a marginal cut of 5 basis points, and one sees a 10 bp reduction.<\/p>\n The one-year LPR was last at 3.85%, and the five-year rate stood at 4.65%.<\/p>\n The mixed expectations come after China\u2019s central bank lowered the amount of cash that banks must hold as reserves, releasing around 1 trillion yuan ($154.35 billion) in long-term liquidity to underpin its post-COVID economic recovery that was starting to lose momentum.<\/p>\n However, the People\u2019s Bank of China (PBOC) kept borrowing costs of medium-term lending facility (MLF), which serves as a guide for the LPR, unchanged at its latest operation last week, when it partially rolled over maturing loans.<\/p>\n \u201cAlthough the PBOC recognises that downward pressure on growth is likely to rise in H2, it has been quite determined in containing financing for the property sector, which is a key signature of Beijing\u2019s \u2018dual circulation\u2019 strategy,\u201d said Lu Ting, chief China economist at Nomura. Lu expects the LPR will likely remain unchanged this month.<\/p>\n A slew of economic data including second quarter GDP and June activity indicators showed that China\u2019s economic recovery might have peaked, suggesting more easing was still needed.<\/p>\n Graphic: China GDP & rates –<\/p>\n China\u2019s economy grew slightly more slowly than expected in the second quarter, weighed down by higher raw material costs and new COVID-19 outbreaks, as expectations build that policymakers may have to do more to support the recovery.<\/p>\n \u201cThe 1Y LPR is likely to fall by 5 bps on July 20 and another 5 bps before year-end due to RRR cuts and reduced interest rate ceilings for term deposits longer than one year,\u201d Li Wei, senior China economist at Standard Chartered, said in a note.<\/p>\n The LPR is a lending reference rate set monthly by 18 banks.<\/p>\n All 21 responses in the survey were collected from selected participants on a private messaging platform.<\/p>\n ($1 = 6.4788 Chinese yuan)<\/p>\n