China’s major lending rates remained unchanged in August, signaling a steady approach by the People’s Bank of China (PBOC) amidst a slowing economy and global monetary shifts.
On Friday, the National Interbank Funding Center announced that the one-year loan prime rate (LPR) held firm at 3.35 percent, while the over-five-year LPR, a benchmark for mortgage rates, stayed at 3.85 percent. These rates serve as crucial references for banks in setting lending rates for businesses and consumers.
Wen Bin, chief economist at China Minsheng Bank, noted that while rates remained unchanged this month, there is potential for adjustments in the near future. “The U.S. Federal Reserve’s recent rate cut—the first in over four years—creates room for China’s monetary policy to become more accommodative,” Wen remarked.
The Chinese economy is exhibiting signs of deceleration, prompting discussions on the need for monetary easing. “Lowering LPRs could effectively reduce financing costs for the real economy and stimulate domestic demand,” Wen explained. “Such measures would not only bolster market confidence and economic vitality but also aid China in achieving its economic targets.”
The LPRs are based on rates from the PBOC’s open market operations and serve as a pricing reference for financial institutions. By keeping the rates steady, the PBOC appears to be balancing the need to support growth while avoiding excessive liquidity that could fuel financial risks.
