Wednesday, February 8, 2023

China maintains its reference interest rate at 3.65%

The People’s Bank of China (BPC, central) announced this Friday that it will maintain its reference interest rate at 3.65%, intact since the reduction of five basic points that it carried out in August last year.

In the monthly update that it discloses on its website, the institution indicated that the reference rate for credits (LPR) will remain at its current level for at least one month.

This indicator, established as a reference for interest rates in 2019, is used to set the price of new loans -generally, for companies- and variable interest loans that are pending repayment.

Its calculation is carried out based on the contributions to the prices of a series of banks -including small lenders that tend to have higher financing costs and greater exposure to non-performing loans-, and its objective is to reduce the costs of indebtedness and support to the “real economy”.

For its part, the LPR for five years or more -the reference for mortgage loans- also registered no changes, remaining at 4.3% after also experiencing its last cut in August 2022, in its case of 15 basis points.

The BPC thus complies with the forecasts of analysts, who anticipated that there would be no movement in the main interest rates in China in this month’s update.

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