March 20, 2020 / 1:46 AM / 9 days ago

China unexpectedly keeps lending benchmark rate unchanged

SHANGHAI, March 20 (Reuters) - China kept its benchmark lending rate steady on Friday, defying expectations for a reduction to ease borrowing costs in an economy jolted by widespread disruptions to businesses from the coronavirus pandemic.

The one-year loan prime rate (LPR) was left unchanged at 4.05% from the previous monthly fixing while the five-year LPR remained at 4.75%.

Forty respondents, or 71.4% of all participants, in a Reuters snap survey had expected a reduction in the LPR, with 36 predicting either a five basis point or 10 basis point cut in the one-year tenor and no change to the five-year rate.

The LPR is a lending reference rate set monthly by 18 banks. The People’s Bank of China revamped the mechanism to price LPR in August 2019, loosely pegging it to the medium-term lending facility rate.

However, the PBOC left borrowing cost on its one-year medium-term lending facility (MLF) loans unchanged on Monday, despite its U.S. counterpart’s decision to slash interest rates to near zero to counteract the economic shock from the coronavirus outbreak.

Reporting by Winni Zhou & Andrew Galbraith; Editing by Sam Holmes & Shri Navaratnam

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