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Chinese central bank leaves reference rate for new loans unchanged

The Chinese central bank left its new loan prime rates unchanged in a move that analysts say could probably heighten pressure on policymakers to ease further in the coming months.

The People's Bank of China left its one-year LPR unchanged at 4.20% and kept the five-year LPR at 4.85%. The move marks the first time that the central bank kept the rates unchanged since it introduced reforms to its LPR mechanism in August. Under the reforms, the central bank sets the new reference point for new loans every month based on submissions by 18 banks.

Today's decision to keep the LPR steady "suggests that monetary conditions have yet to be eased," according to Julian Evans-Pritchard, senior China economist, and Martin Lynge Rasmussen, China economist, at Capital Economics.

"[A]s cuts to the LPR only feed through to interest rates on new loans, not outstanding ones, the additional monetary easing that we think will materialize before long will probably not limit itself to targeting the LPR," the analysts said, adding that the PBoC could deliver a "more impactful" easing by cutting the lending rate for short-term liquidity needs.

The PBoC's decision comes after China's annual GDP growth slumped to its worst level in nearly three decades in the third quarter, reinforcing calls for further monetary policy easing.