SHANGHAI: China kept its benchmark lending rates unchanged for the ninth month in May on Monday , matching market expectations, as a weakening yuan and widening yield differentials with the United States limited the scope for any substantial monetary easing.
Earlier in the day, China's one-year loan prime rate was kept at 3.65 per cent and its five-year LPR was unchanged at 4.30 per cent. "Within monetary policy, symbolic measures such as a reserve requirement ratio cut are more likely than policy rate cuts this year given the already wide US-China interest rate differential and RMB depreciation pressure."
The MLF rate serves as a guide to the LPR and markets mostly use the medium-term rate as a precursor to any changes to the lending benchmarks. "The downside to lowering the LPR is that it reduces banks' return on their existing loan book, adding pressure to their net interest margins, which are at a record low."
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