China’s central bank left its key lending rates unchanged for a fifth consecutive month on Thursday, as policymakers seek to stabilize the yuan and monitor external risks, particularly renewed trade tensions with the United States. The People’s Bank of China (PBOC) maintained the one-year loan prime rate (LPR) at 3.1% and the five-year LPR at 3.6%, in line with market expectations.
The rate decision mirrors the U.S. Federal Reserve’s move earlier this week to keep benchmark interest rates steady, though Fed officials signaled two potential rate cuts by year-end. In contrast, the PBOC continues to juggle between supporting growth and defending the Chinese currency, which has come under pressure amid President Donald Trump’s tariff threats.
A Reuters poll conducted ahead of the announcement showed that 29 out of 33 market participants anticipated no change to either of China’s lending benchmarks. Most new and outstanding loans in the country are pegged to the one-year LPR, which directly influences corporate and household borrowing costs. The five-year LPR serves as the primary benchmark for mortgage rates.
The PBOC last adjusted its LPRs in October 2024, delivering a quarter-point cut in an attempt to reinvigorate economic momentum. The central bank has also kept its key seven-day reverse repo rate unchanged at 1.5% since that time.
China’s leadership has pledged to expand monetary easing policies in 2025 to meet an ambitious GDP growth target of “around 5%.” However, any immediate policy moves appear contingent on the evolving trade dynamics with the U.S., which have weighed on investor sentiment and pressured the yuan.
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