The People’s Bank of China (PBOC) made a decision Wednesday to hold its primary benchmark lending rates steady as it evaluates the results of recent economic stimulus programs. The one-year loan prime rate remained constant at 3.1%, while the five-year LPR stayed at 3.6%.
Analysts in the market surveyed by Reuters accurately predicted the PBOC’s move to hold the lending rates steady for the month. Bruce Pang, head of research at JLL, stated there was “no immediate need to adjust the LPR this month” as the Chinese decision makers were likely still examining the effects of recent economic support efforts.
Pang observed that the historically low net interest margins at Chinese commercial banks have hindered their capacity to encourage lower lending rates. Although additional policy rate deductions seem unlikely before year end, the potential for rate slashes in 2025 persists.
The decision to hold rates came on the heels of a 25 basis-point reduction in both the one-year and five-year LPRs last month. This followed October’s economic data from China, highlighting the economy’s tepid momentum despite a wave of recent stimulus declarations.
China’s industrial production and fixed asset investment expansion in October were slower than anticipated. The yearly drop in real estate investment from January to October escalated further than the previous year. Only retail sales outperformed expectations, with a 4.8% yearly increase, signaling that the economic stimulus was starting to permeate specific sectors of the Chinese economy.
Since late September, the Chinese authorities have been increasing stimulus declarations to stimulate the sluggish economic growth, troubled by an extended housing crisis and weak consumer and business sentiment.
