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CHINA

Markets look ahead to LPR announcement later today, due at 0230BST/0930HKT. Consensus is for no change, Citi's own estimate is in line with this: "Citi Economics believes though monetary policy tightening is ongoing, the PBoC will keep the policy rate – 1-year MLF rate unchanged this year. As it is referenced to the MLF rate, the one-year LPR will likely remain at 3.85% in May and the five-year LPR rate will likely remain at 4.65%."

  • A piece in the China Securities Daily, citing analysts, backs this up; the central bank has rolled over the maturing medium-term lending facilities with the amount and the rate unchanged, indicating it intends to keep policies stable and guide interbank rates around policy rates, the newspaper said. Banks also lack the motivation to increase May LPR quotes given marginal changes in banks' capital costs, the newspaper said citing Wang Qing, chief analyst at Golden Credit Rating. The one-year LPR has been unchanged for the 12th month at 3.85%, with the five-year LPR also unchanged at 4.65%.
  • LPR rates have been unchanged since April 2020 when the PBOC cut rates to help cope with the impact of the pandemic. The MLF, which is linked to the LPR, was unchanged for the 14th month earlier this week. While there is speculation that the PBOC could increase the LPR's to help reign in rising producer prices, the bank said in its Q1 Monetary Policy report that the pickup in inflation is expected to be transitory and the bank could look through the readings. There is also some reduction in credit growth which is seen as implied tightening from the PBOC, reducing the need for additional tightening measures.

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