The People's Bank of China (PBoC) decided to keep its interest rates steady for the second consecutive session on Friday. The central bank left its one-year loan prime rate (LPR) at 3.10 percent and maintained the five-year LPR—used as a benchmark for mortgage rates—at 3.60 percent. This decision was largely anticipated by market observers.
In October, the PBoC had previously reduced both the one-year and five-year LPRs by 25 basis points. The LPR is determined on a monthly basis using submissions from 18 designated banks, although the government in Beijing has significant influence over this rate-setting mechanism. It replaced the traditional benchmark lending rate back in August 2019.
Amidst efforts to bolster the economy, Beijing has introduced various fiscal and monetary easing measures. However, recent economic indicators reveal that China is still grappling with deflationary trends and weak domestic demand.
The announcement from the PBoC followed the US Federal Reserve's decision on Wednesday to lower its interest rate by another quarter point, a move that analysts had widely anticipated. Nevertheless, Federal Reserve officials have signaled fewer rate cuts than previously projected for the coming year.
