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The People’s Bank of China (PBOC) kept its benchmark loan prime rates unchanged on Friday, aligning with market expectations. The one-year LPR stayed at 3.00%, while the five-year LPR, a key reference for mortgage rates, remained at 3.50%. Both rates are at record lows, reflecting China’s long-standing monetary easing efforts aimed at curbing deflation and boosting domestic demand.
The decision follows a recent easing in U.S.-China trade tensions, reducing the urgency for further monetary stimulus. In May, the PBOC had trimmed both LPRs to support the economy amid weak demand and deflationary pressure. However, the subsequent agreement between China and the U.S. to scale back tariffs signaled less immediate risk to economic stability, offering policymakers room to pause.
The LPR, determined by 18 designated commercial banks, serves as China’s benchmark lending rate. A lower LPR injects liquidity into the financial system and encourages borrowing. Despite steady exports since the May tariff agreement, other sectors of the Chinese economy have shown mixed performance.
Persistent disinflation remains a key concern, potentially prompting future rate cuts if economic indicators weaken further. For now, however, the PBOC is expected to monitor developments in trade talks and domestic data before making additional policy moves.
By holding rates steady, the central bank signals cautious optimism as trade tensions ease and external risks stabilize. Still, any sustained slowdown in inflation or domestic growth could reopen the door for further monetary easing.
This decision highlights China’s careful balancing act—supporting growth while preserving financial stability in a shifting global economic landscape. As the trade outlook improves, attention will remain on inflation trends and consumer activity to guide future monetary policy.
