(Yicai) Sept. 20 -- China's central bank left the loan prime rate, which banks use to price mortgages and corporate loans, untouched this month even as the Federal Reserve cut US interest rates this week for the first time in four years.

The People's Bank of China yesterday kept the one-year LPR at 3.35 percent and the over five-year LPR at 3.85 percent in September. The former has dropped 10 basis points and the latter 35 bps since the start of this year. The lender slashed each by 10 bps on July 20.

China is still observing the effects of the July cuts, according to Golden Credit Rating International. Given that the macroeconomic downward pressure remains controllable and various risks continue to be under effective control, there is no significant urgency to lower policy rates and guide LPR quotes to decline in the short term, it added.

Considering the promotion of domestic demand and the improvement of LPR quality, there is still a possibility of LPR cuts this year, said Wen Bin, chief economist at China Minsheng Bank.

Commercial banks' net interest margin was 1.54 percent in the first and second quarters of this year, down 15 bps from the fourth quarter of last year and remaining below the warning level of 1.8 percent, Golden Credit said.

A significant slash in policy rates is not conducive to the stability of lenders' operations, noted Wang Qing, chief macroeconomic analyst at Golden Credit.

On Sept. 18, the Fed slashed its benchmark policy rate by 50 bps to between 4.75 percent and 5.00 percent. It was the first such cut since March 2020, marking the monetary policy's shift from a tightening to an easing cycle.

The space to adjust China's monetary policy expanded following the Fed's large rate cut, with the probability of interest rate cuts and reserve requirement ratio trims increasing, Golden Credit Rating pointed out.

External constraints on China's monetary policy weakened after the US launched its rate cut cycle, Wen noted. There is still room and necessity for LPR and RRR cuts to boost market confidence further, enhance the Chinese economy's intrinsic momentum, and promote the realization of the annual economic growth target, he added. 

Editors: Shi Yi, Martin Kadiev