China’s central bank opted to keep its benchmark lending rates unchanged on Monday, amid persistent concerns about subdued consumer spending and a cooling economy.
The People’s Bank of China (PBOC) maintained the 1-year loan prime rate (LPR) at 3.0%, while the 5-year LPR, which often guides mortgage rates, was held at 3.5%.
The LPR, typically reserved for the best-qualified borrowers, is determined by a survey of select commercial banks, whose proposed rates are submitted to the central bank. The 1-year LPR directly impacts most corporate and household loans across China, whereas the 5-year rate serves as a baseline for home mortgages.
The rate decision follows last week’s GDP report, which showed China’s economy expanding 5.2% year-on-year in the second quarter—slower than the previous quarter’s 5.4% but surpassing the 5.1% growth predicted by economists surveyed by Reuters.
Retail sales growth also lost momentum in June, climbing just 4.8% compared to a 6.4% year-over-year rise in May, and missing an anticipated 5.4% increase. In currency markets, the offshore yuan saw little change in the wake of the policy announcement, stabilizing at 7.179 per US dollar.
