China Maintains Stable Lending Rates Amid Trade Tensions and Currency Pressures
China’s central bank retained its lending rates steady amid trade tensions and plans for monetary easing. The 1-year LPR remains at 3.1% and the 5-year LPR at 3.6%, while broader policy reflects caution in response to foreign tariffs. Analysts believe any future cuts will be influenced by U.S. trade actions.
China’s central bank maintained its key lending rates on Thursday, navigating the dual objectives of supporting economic growth and stabilizing its currency amidst escalating trade tensions. The People’s Bank of China has kept the 1-year loan prime rate (LPR) at 3.1% and the 5-year LPR at 3.6%, consistent since the last quarter-point cut implemented in October.
The decision to hold rates steady aligns with the U.S. Federal Reserve’s recent commitment to maintain benchmark interest rates, even as Fed officials suggest potential rate cuts might occur later, specifically half a percentage point through 2025.
The LPRs in China, which serve as benchmarks primarily for banks’ most creditworthy clients, are calculated monthly based on rates proposed by selected commercial banks. The 1-year LPR significantly influences corporate and household loans, while the 5-year LPR is pivotal for mortgage loans.
Additionally, the People’s Bank has kept its major policy rate, the 7-day rate, steady at 1.5% since October, as part of its strategy to defend the yuan against downward pressures arising from potential tariff increases.
Top government officials in China have committed to enhancing monetary easing this year, with interest rate reductions anticipated “at appropriate times,” particularly as the country pursues a robust growth target of around 5%. While rate cuts have not yet been realized, analysts predict that the PBOC’s future actions will be influenced by U.S. trade policy decisions under President Donald Trump.
In summary, China’s central bank has kept its lending rates unchanged to balance economic growth with currency stability amid trade conflicts. The maintenance of key rates follows a similar approach by the U.S. Federal Reserve, while the PBOC prepares for possible monetary easing to support growth targets. Analysts suggest that the trajectory of China’s monetary policy will closely monitor developments in U.S. trade policy.
Original Source: www.cnbc.com
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