China kept its benchmark lending rates unchanged for the ninth consecutive month, despite repeated government pledges to boost domestic demand amid slowing growth.
The People's Bank of China announced Monday it would maintain the five-year Loan Prime Rate at 3.5% and the one-year LPR at 3.0%. The five-year rate serves as the benchmark for mortgage loans, while the one-year rate guides general lending. The decision matched expectations from all 22 economists surveyed by Reuters.
The central bank last cut both rates by 0.1 percentage point in May 2024, when tariff pressure from the Trump administration intensified. While authorities lowered re-lending and rediscount rates by 0.25 percentage point last month, analysts say the move has limited impact on stimulating domestic consumption compared to LPR cuts.
Critics note the government's actual policy actions remain passive despite multiple announcements of enhanced financial support to counter the economic slowdown. Some analysts see little chance of a rate cut in the first quarter.
"The central bank still has room to lower the reserve requirement ratio and policy rates, using this as a tool to manage market expectations," Tianfeng Securities said in a research note. "Further rate cuts are possible this year, but the timing is difficult to predict, and a first-quarter cut is unlikely."
China calculates the LPR monthly by aggregating rates from 20 major commercial banks, factoring in their funding costs and risk premiums. Although a separate benchmark rate exists, the central bank has left it untouched for years, making the LPR the de facto policy rate.