A new benchmark interest rate Chinese banks will need to use to set lending rate...
BEIJING - A new benchmark interest rate Chinese banks will need to use to set lending rates will be linked to the central bank’s medium-term liquidity facility, a People’s Bank of China policy adviser told state media on Monday.
“Through the reform, it is clearly required that the banks’ lending rates should be linked to the LPR , and the LPR should be linked to the MLF interest rate, thus establishing a relatively smooth transmission mechanism,” Ma Jun said in remarks published on the website of state radio. Analysts believe the central bank could cut the one-year interest rate on the MLF, which stands at 3.3%, in order to guide borrowing costs lower.
Ma said the LPR reform will help it better reflect changes in market rates and help lower corporate funding costs.
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