(Yicai) May 20 -- China has left the benchmark loan prime rate, which is reset every month, untouched this month as liquidity in the financial system remains ample.

The People’s Bank of China kept the one-year LPR at 3.45 percent and the five-year LPR, which many lenders use as a mortgage reference rate, at 3.95 percent, the central bank said today.

It was not necessary to trim the LPR this month as the medium-term lending facility rate, to which the LPR is hooked, was not changed, said Wen Bin, chief economist at China Minsheng Bank. The recent scrapping of interest floor rates on some personal housing loans has also helped.

In addition, as interest rates are low, keeping the LPR the same can prevent funds from circulating idly within the financial sector and improve efficiency, Wen added.

There is no urgency to cut interest rates, said credit rating agency Golden Credit Rating. Economic growth in the first quarter exceeded expectations and the effect of existing policies still needs to play out. Market interest rates have declined recently, so now is not the time to lower policy interest rates.

The LPR could still be trimmed later, Wen said. The US’ Federal Reserve is expected to cut interest rates, relieving the pressure on the exchange rate. Meanwhile, deposit costs are likely to decline significantly. In which case policy interest rates and LPR are likely to be slashed to save financing costs.

There is still room for the LPR to come down further, said Zhou Maohua, a macroeconomic analyst at China Everbright Bank’s financial market department. There is an imbalance in the country’s deposit market with too many fixed deposits. The interest rates of treasury bonds dropped sharply this year to below that of deposits, creating the conditions for banks to lower their rates further.

Next, mortgage rates might be lowered further and home buying curbs could be relaxed more, said CITIC Securities.

China scrapped interest floor rates on mortgages for first- and second-home purchases on May 17.

Editor: Kim Taylor