China Defies Global Trend, Keeps Loan Prime Rate Steady Amid Tightening
China's central bank has maintained its loan prime rate (LPR) steady for a 16th consecutive month, bucking the trend of global monetary tightening. The People's Bank of China announced on the 20th that it would keep the one-year LPR at 3.0% and the five-year LPR at 3.5%. This decision was in line with market expectations, extending the same rates for a 16th month since May last year.
The LPR is a benchmark calculated monthly by the People's Bank of China based on funding costs and risk premiums submitted by 20 major commercial banks. The one-year rate serves as the reference for general credit loans, while the five-year rate anchors mortgage lending.
China's decision to hold rates steady stands in contrast to the trajectory of global monetary policy. The U.S. Federal Reserve raised its benchmark rate by 25 basis points at the Federal Open Market Committee (FOMC) meeting on the 16th, lifting the target range from 3.50-3.75% to 3.75-4.00%. At the meeting led by newly installed Chair Kevin Warsh, 16 of 18 participants projected that additional rate hikes would be appropriate before year-end, with the median year-end policy rate projected at 4.1%