MNI POLICY: PBOC Keeps Jan Loan Prime Rate Unchanged

China's central bank maintained its key loan rate unchanged Wednesday for the ninth month in succession as it flags a "policy normalization" stance amid historically high levels of national debt.

The Loan Prime Rate, the benchmark to set companies' cost of borrowing, remains at 3.85% for a one-year maturity and at 4.65% for the five-year maturity. The move was in line with expectations as the PBOC held its Medium-Term Lending Facility rate at 2.95% on Jan. 15. The LPR is linked to the one-year MLF, which is viewed as being closer to market rates.

Policy advisors predicted the country would pay more attention to risk prevention, including dealing with the debt pressures as the economy has been recovering at a steady pace with GDP up 2.3% in 2020, while Q4 saw a 6.5% growth.

PBOC officials told reporters last Friday that the current interest rates were "appropriate", but market analysts still think the central bank may introduce some temporary liquidity facilities or add to its open market operations to meet the big cash demand before the Chinese New Year holiday starting from Feb. 11.

The central bank drained CNY40.5 billion in MLF this month, the first net drain after five months of consecutive injections, according to Wind.