(Yicai) Oct. 20 -- China’s central bank kept the loan prime rate, the country’s benchmark lending rate to which mortgages, corporate loans and fixed-asset investments are anchored, unchanged today. But more reductions are possible later in the year, experts said.

The one-year LPR remains at 3.45 percent and the five-year LPR at 4.2 percent this month, the People’s Bank of China said today. The benchmark lending rate is reset every month.

This is in line with market expectations, said Wang Qing, chief macro analyst at Golden Credit Rating International. The medium lending facility rate, which is closely pegged to the LPR, was not changed in October and so there was little impetus to lower the LPR.

The central bank released CNY789 billion (USD107.8 billion) of fresh funds into the financial system on Oct. 16 through one-year MLFs, CNY289 billion more than the amount that matured, but kept the rate unchanged at 2.5 percent.

There is still room for the five-year LPR to come down by between 30 basis points and 40 bps, Wang said. Even if the MLF rate stays unchanged, the five-year LPR is still very likely to be trimmed as banks will be relying on cutting deposit rates to maintain their net interest spread, he added.

Interest rates on new residential mortgages might also need to be reduced further to spur the real estate market, Wang said.

The momentum of economic recovery has become much stronger, as evidenced by the better-than-expected gross domestic product growth in the third quarter, which means that there is less urgency to trim the LPR, Wang said.

The LPR was untouched in October, largely due to the fact that the MLF rate stayed the same, banks’ net interest margins are still under pressure and the real economy is bouncing back, said Zhou Maohua, macro economy researcher at China Everbright Bank's department of financial markets.

There are indications of an accelerated recovery of the Chinese economy as key economic gauges rebound, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. In order to ensure that this trend continues, the PBOC needs to keep implementing more policies, continue to moderately lower policy lending rates and reduce businesses’ financing costs, he added.

Editors: Zhang Yushuo, Kim Taylor