China leaves lending benchmarks unchanged for 3rd straight month in Nov

SHANGHAI (Reuters) -China kept its benchmark lending rates unchanged for the third straight month on Monday, as a weaker yuan and persistent capital outflows continued to limit Beijing’s ability to ease monetary conditions to support the economy.

As expected, the one-year loan prime rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%.

In a Reuters poll of 22 market watchers conducted last week, all respondents predicted no change to the one-year LPR. However, five participants expected a reduction to the five-year LPR.

The steady LPR fixings came after the People’s Bank of China (PBOC) partially rolled over maturing medium-term policy loans last week and kept the interest rate unchanged for a third straight month, suggesting policymakers remained wary of stoking further yuan weakness by easing monetary conditions.

The medium-term rate, called the medium-term lending facility, serves as a guide to coming changes in the LPR.

Meanwhile, widening policy divergence with other major economies, particularly the United States, could worsen fund flows. The latest official data showed that overseas investors had sold their holdings of China’s onshore bonds for a ninth straight month in October, the longest streak of outflows on record.

The yuan has lost more than 10% against the dollar so far this year and looks set for the biggest annual drop since 1994.

The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks that submit proposed rates to the PBOC every month.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China last cut both LPRs in August to boost the economy.

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