China’s central bank kept its benchmark lending rates unchanged for the 16th consecutive month in September, a decision that aligned with market expectations amid signs of a slowing economic recovery. The People’s Bank of China (PBOC) announced the decision on Sept. 22, maintaining stability in its core lending policies.
The one-year loan prime rate (LPR) was held at 3.85%, while the five-year LPR remained at 4.65%. The one-year LPR is the basis for most new and outstanding corporate loans in China. The five-year rate serves as the primary reference for residential mortgages.
The rates have not been adjusted since April 2020, when the PBOC implemented cuts to support the economy during the initial phase of the COVID-19 pandemic.
The decision was widely anticipated by financial markets. A poll conducted by Reuters prior to the announcement showed that a majority of traders and analysts expected no change to either LPR. This forecast was largely based on the central bank’s decision one week earlier to keep the rate on its medium-term lending facility (MLF) loans unchanged. The MLF rate, which stands at 2.95%, is a key policy instrument that guides the LPR.
The LPR is set monthly by 18 designated commercial banks, which submit proposed rates in the form of a spread over the MLF rate.
The central bank’s move comes as recent economic data indicated a moderation in China’s growth. Figures released by the National Bureau of Statistics for August showed slower-than-expected growth in both retail sales and industrial production.
At the same time, authorities have been managing risks within the country’s property sector, including liquidity issues affecting major developers such as China Evergrande Group.
In a statement accompanying a recent liquidity injection, the PBOC has reiterated its commitment to maintaining stable and consistent monetary policy. The central bank aims to balance economic support with efforts to control debt levels and prevent financial risks. Analysts have noted that this approach involves targeted support measures rather than broad-based rate adjustments.
