China keeps its benchmark interest rate at 3% for the ninth consecutive month

Shanghai (China).- The People's Bank of China (PBOC, central bank) announced this Tuesday that it will maintain its benchmark interest rate at 3% for the ninth consecutive month, thus fulfilling the most widespread forecasts among analysts, who did not anticipate any change. In the monthly update published on its official website, the institution indicated that the loan prime rate (LPR) in English for one year will remain at the aforementioned level for at least one more month.

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This indicator, established as a reference for interest rates in 2019, serves to set the price of new loans - generally, for companies - and those with variable interest that are pending repayment. Your calculation is based on contributions to the prices of a series of banks - which includes small lenders that tend to have higher funding costs and greater exposure to bad debts - and aims to reduce borrowing costs and support the 'real economy'. The central bank also indicated this Wednesday that the LPR at five years or more -reference for mortgage loans- will remain at 3.5%, also in line with the experts' forecasts. The last interest rate cut in China dates back to last May, when the institution undertook a ten-basis-point cut: for the one-year LPR, from 3.1% to 3%, and for the five-year or more, from 3.6% to 3.5%. Faced with a complicated situation for the world's second-largest economy, that decision was described as "obvious" by analysts, who predicted possible additional cuts throughout the rest of 2025 that ultimately did not occur. Some experts had also pointed out in recent days a possible reduction in the LPR after the PBC assured that it had sufficient margin to undertake additional cuts this year while announcing its first easing measures for 2026, described as "limited" and "low profile" by analysts. According to economists, the PBOC enjoyed in recent months room to lower rates without fear of a further depreciation of the yuan thanks to the cuts made by the US Federal Reserve (Fed), but the fear of a bubble in values or of worsening the situation of excess industrial capacity weighed more. Besides the uncertainty caused by trade disputes with the United States, low domestic and international demand, coupled with risks of deflation, insufficient stimuli, a prolonged real estate crisis, or a lack of confidence among consumers and the private sector are some of the causes cited by analysts to explain a less brilliant-than-expected recovery of the Chinese economy after the 'zero-COVID' years.