China kept its benchmark lending rates unchanged for the fourth consecutive month in September. This move was in line with market expectations following the central bank’s decision to hold the main policy rate steady last week
The steady Loan Prime Rate (LPR) fixings reflect the authorities’ cautious approach to monetary easing. This comes amid easing Sino-U.S. trade tensions, resilient exports, and a recent stock market rally. The decision shows a careful balance despite signs of a domestic slowdown and monetary easing by the U.S. Federal Reserve.
The one-year LPR was kept at 3.0%, while the five-year LPR remained unchanged at 3.5%. In a Reuters survey of 20 market participants conducted last week, all respondents expected no change to either rate despite a recent spate of weak economic data.
China’s central bank left the seven-day reverse repo rate, which now serves as the main policy rate, unchanged last week. Recent data showed that factory output and retail sales in August recorded their weakest growth since last year, highlighting domestic economic headwinds. Meanwhile, China’s stock market has been performing strongly, with the Shanghai Composite Index hovering near 10-year highs. On the trade front, U.S. President Donald Trump said he and Chinese President Xi Jinping made progress on a TikTok agreement and plan to meet face-to-face in six weeks in South Korea to discuss trade, illicit drugs, and Russia’s war in Ukraine.
