Will The LPR Fixings Move Lower?

The BBG consensus looks for a 5bp cut when it comes to today’s 1- & 5-Year Loan Prime Rate (LPR) fixings, which would leave the respective interest rates at 3.65% & 4.55%.

• 9 of the 16 surveyed by BBG look for a cut in the 1-Year LPR (6 look for a 5bp step, with 3 looking for a 10bp step and 7 look for no change). Meanwhile, 9 of the 13 surveyed by BBG look for a 5bp cut in the 5-Year LPR, with the remaining 4 looking for no change.
• The shallower than expected headline 25bp RRR cut announced by the PBoC on Friday, coupled with inaction when it comes to the interest rate applied to last week’s 1-Year MLF operations (with a cut in that particular interest rate often acting as a pre-cursor for a move in the LPR fixings) has many questioning whether the LPRs will be fixed lower this time around, as banks may have not seen their own costs fall enough to justify such a move.
• Many of those that are looking for a cut have sounded a little less assured re: the chances of such a move in the wake of the PBoC’s restrained easing, which left many puzzled by the PBoC’s limited steps given the pro-growth phraseology that has dominated rhetoric coming out of the policymaking sphere in recent months. The Bank continues to hold off on “flood-like” stimulus even as it supports a faltering economy with China looking to achieve an ambitious GDP growth target for ’22.