SHANGHAI, Oct 19 Reuters - China is expected to keep its benchmark lending rate steady for the 18th straight month at its October fixing on Wednesday despite growing pressure on the economy, a Reuters survey showed.
Nineteen traders and analysts, or 95% of 20 participants, predicted no change in either the one-year Loan Prime Rate LPR or the five-year tenor after the People's Bank of China PBOC kept the interest rate on its medium-term loans unchanged last week.
The remaining one respondent predicted a marginal cut of five basis points to the one-year LPR and expected no change to the five-year tenor, which influences the pricing of mortgages.
The five-year LPR is currently at 3.85% and the one year rate is 4.65%.
China's economy expanded 4.9% from the quarter of July-September from a year earlier, data showed on Monday, its weakest pace since the third quarter of 2020.
The world's second largest economy is grappling with power shortages that have hit factories and debt problems in its manufacturing sector.
The strong market expectation for a steady LPR fixing in October came as the PBOC left maturing medium-term loans unchanged Friday and played up their interest rates last week.
The MLF interest rate sets a baseline for commercial bank LPR quotes, economists at Capital Economics said in a note.
The PBOC also maintained market rate distribution broadly stable recently, giving commercial banks little incentive to lower their own rates of lending. All of this points to the LPR being left intact this month, they said, but adding an obvious next step would be a cut to the five-year LPR to help support housing demand.
The interest rate on the MLF's medium loan facility serves as a guide for the LPR, and many traders and analysts say any adjustment to the LPR should mimic changes to the borrowing cost of MLF loans.
Sun Guofeng, head of the Central Bank's monetary policy department, said liquidity in China's banking system would be essential in the fourth quarter with basic fluctuations, while emphasising that the PBOC would stick to normal monetary policy, which will be flexible, targeted and appropriate.
The LPR is a reference rate for loans set monthly by 18 banks.
All the answers in the survey were collected from selected participants on a private messaging platform.